How Insurance Can Encourage Farmers to Mitigate Climate Change Risks

How Insurance Can Encourage Farmers to Mitigate Climate Change Risks
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The sweeping impacts of climate change impact farmers at significant rates. As a result, insurance companies take a hit as well. For example, when nearly 20 million acres of farmland flooded in the American West, it initiated $4 billion in payouts from a federal crop insurance program.

Because of disasters like this, farmers are coming around on the importance of mitigating the impacts of climate change to protect their own livelihoods. Insurance companies can help farmers make beneficial sustainability choices by helping those in the agriculture industry understand their impact and reward them for limiting it.

Here’s what you should know about how insurance can encourage farmers to make a difference in climate change. 

Agriculture Contributes to Climate Change

Virtually no industry goes untouched by the impacts of climate change. For example, even real estate—both in terms of building and insurance policies—has to take into account the problems caused by climate disasters. With more homes built in unsustainable and unsafe fashions, the more companies have to pay out. From wildfires to flooding, the disasters caused by careless industry can be devastating.

Another sad reality is that agriculture tends to make the problem even worse. According to research by the Organisation for Economic Cooperation and Development, the agriculture industry contributes 17% of greenhouse gas emissions through its activities and another 7-14% through land use. These emissions can increase the likelihood of a climate disaster, which in turn puts farmers at exceptional risk.

Nitrous oxide and methane emissions from soils, fertilizers, livestock, and paddy rice cultivation all play their role in increasing this risk. And farmers are taking notice. With the dangers presented by flooded fields, droughts that make crop cultivation impossible, and wildfires that threaten lives and land, the need for change is clear.

And yet, making the changes needed to mitigate climate change risks might seem impossible. With financial and practical concerns limiting what the average farmer is capable of changing, many in the agricultural industry may feel at a loss. For example, the no-till or crop cover actions needed to reduce carbon emissions mean a financial sacrifice for farmers because these processes aren’t exactly cheap.

That’s where helpful insurance policies come in. 

Insurance Policies Can Help

How Insurance Can Encourage Farmers to Mitigate Climate Change Risks

Insurance companies can play a key role in helping farmers mitigate climate change risks by providing the kinds of incentives and policies that encourage safer agricultural practices. Right now, with all the threats presented by climate change, such incentives and policies are being encouraged in every insurance type imaginable. 

For example, California Insurance Commissioner Ricardo Lara recently called on state insurance providers to do their part to incentivize wildfire risk mitigation. These incentives would come in the form of insurance discounts for homeowners who do their part to stay safe and prepare.

The same kind of insurance incentives can be applied to help make sustainable agriculture more financially achievable for farmers. Sustainable agriculture means using renewable resources whenever possible, planning for growing needs, and finding creative ways to reuse resources all while allowing farmers to financially thrive. By making it possible for farmers to strive for these measures while cutting down cost barriers, insurance companies can help develop a healthier world. 

Here are just some of the many items for which insurance providers could offer discounts to farmers who limit their climate impact:

  • Planting cover crops
  • Diversifying crop rotation
  • Practicing “no-tillage” methods
  • Growing crops for use in renewable materials
  • Mitigating water use and soil erosion

By offering farmers the chance to recoup the costs of practicing sustainability, insurance companies can play a key role in developing a safer environment for everyone. In practice, this has already had some success. Iowa’s “Good Farmer” discount, for instance, gives farmers a $5 discount per acre for those that use cover crops. This typically equated to a 40% discount on overall premiums and funded over 168,700 acres of sustainable land.

The science surrounding such sustainability shows clear benefits for farmers that translate into further cost savings. By rotating crops and practicing no-till methods, researchers at Dakota Lakes reduced weed pressure by 97%. This means a reduced need for chemical use and labor while improving quality.

With the right financial incentives provided in insurance deals, the risk of climate disaster can be brought down. As a result, both farmers and insurance companies can save money in a world that’s less risky for all. 

Mitigating Risks with Insurance Incentives

We all know how devastating climate disasters can be. Hurricanes, for example, can occur at greater rates as a side effect of climate change. As the cause of two of the six most fatal disasters in US history, hurricanes ravage lives and land, often making farming impossible in an area for a long time. 

Fortunately, sustainable farming practices can help mitigate the risks of climate disasters. With the right insurance discounts and other incentives, farmers can better prepare for eventualities while mitigating their own carbon outputs. As a result, we can all save money and stay safer.

Assess your approach to agriculture and evaluate the insurance policies open to you. With the right incentives, we can develop more sustainable farming and food production practices that turn the tide on climate change.

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