Agricultural Risk Assessment with GIS

Every season that a farmer plants a crop in the field, or raises animals for meat production, there is an inherent risk to their substantial economic investment. To guard against losses, policies from insurance companies willing to underwrite these risks for a premium are an option that can be bought. How this premium is calculated by the insurance company relies heavily on tables calculated by professional actuaries. Many of the potential reasons for filing a claim against an insurance policy are geographical in nature, for example, climatic events such as hail, frost, and drought. For this reason, spatial analysis has proven useful in the calculation of the risk assessment tables and hence the fixing of insurance costs.

It would, however, be incorrect to suggest that all risk to farming investments stem from physical parameters. Other elements need to be assessed including the claim history on a specific parcel of land or field, and the current management of the farm to assess whether best practices are being used, thereby reducing risks. Although not traditionally seen as geographic in nature, these factors do have a location aspect and can be incorporated into the final assessment. Finally, more ubiquitous elements, those not really controlled substantially by location, for example, federal interest rates and global commodity prices, are incorporated.

The Geostatistical Analyst extension for ArcGIS and ArcView allows scientific analysis of these factors and an ultimate calculation of risk that can vary across an agricultural landscape. Incorporating historical climatic data, claim type, and degree data allow a more accurate picture to be illustrated, with the result being a fairer assessment for farming clients.