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Insuring against bad weather

DANIEL LOOKER 03/06/2012 @ 10:45am Business Editor

Doug Theobald's Shelbyville, Indiana, farm fought a wet planting season last year.

“The majority of what we planted was at the end of May and early June,” he says. Fortunately, Theobald had insured against wet weather through The Climate Corporation. Two weeks after the insured planting period, he got a check for the yield losses the planting delays would cause. The payment was about $50 an acre, with half of it deducted to cover the premium. “It did help enough to try it again,” he says.

Quick and customized

In a digital age, the San Francisco-based company founded by two Google veterans has replaced crop adjusters with data. It uses National Weather Service (NWS) radar and independent weather stations to calculate if weather will impact the yields of policyholders.

“We're using weather as a proxy for yield,” says Jeff Hamlin, the insurer's head of agronomic research.

To calculate how weather will affect yields, The Climate Corporation (formerly WeatherBill) matched 30 years of weather data and 30 years of federal crop insurance claims for every agricultural county. It has refined data for expected yields with maps of soil types.

Farmers can choose the crop, expected yield, and fields they want to insure. They can pick from a menu of named perils for all crops, or all common perils for corn, soybeans, wheat, and milo, sold as Total Weather Insurance (TWI). Like federal crop insurance, TWI must be purchased by March 15, and premiums aren't due until harvest. Unlike federal crop, premiums aren't subsidized. For five years the private company has sold insurance that's rated “A” by A.M. Best and is approved by all state insurance commissioners.

Coverage Options

Total Weather Insurance for 2012 corn covers these weather perils:

● Planting Rain: Excess rain that can delay planting and fieldwork.

● Drought: Depleted soil moisture that affects pollination and yields.

● Daytime Heat Stress: Hot days that can lower crop growth and hinder pollination.

● Nighttime Heat Stress: Warm nights that reduce kernel growth due to increased plant respiration.

● Excess Rain: Excessive local rainfall that can lead to standing water, which starves the crop of oxygen and promotes disease.

● Low Heat Units/Freeze: A cool growing season or early freeze that can keep corn from reaching full maturity.

Hamlin says the policies supplement federal crop insurance, whose insurable yields, even with new updates, don't match your goals. TWI is designed to pay out more often than federal crop – up to 30% of the time – to cover shallow losses.

Theobald says TWI has improved. Last year the grid for NWS-calculated rainfall was 12×14 miles, too big for one 5.5-inch downpour. This year it's 2.5 miles square, a pixel on NWS radar. “The program definitely has a fit,” he says.

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