Agribusiness Goes High Tech
Farmers and ranchers are using sophisticated technology to increase productivity and reduce injuries.
The use of sophisticated technology boosted agricultural productivity and reduced worker injuries, but it brought new exposures for farmers and ranchers.
Drones, robots, RFID tags and precision farming are just some of increasingly sophisticated technologies used in agribusiness.
Mike Williams, senior product director for Travelers’ agribusiness division in Hartford, Conn., said drones are broadly used in agribusiness, not only for determining topography, the moisture content of the soil and the health of crops, but also to collect data — and even locate animals.
“A rancher who has miles of pasture fencing is using drones, instead of driving a truck or ATV all that way, to make sure the fence is not broken or damaged so cattle won’t wander,” Williams said.
“If a cow has wandered from the herd, they can use a drone to help locate that animal, especially if there is bad weather and the rancher doesn’t want to risk sending employees out because they could get injured.”
But there are risks: Drones could run into wind turbines, collide with helicopters spraying chemicals on crops, or start wildfires if they fall in brushy or grassy areas, he said.
The Federal Aviation Administration now requires licensed pilots to operate drones for commercial purposes, and the drones must be within the operator’s line of sight.
Farmers and ranchers are also using tracking and sensors, such as RFID tags, on cattle to track their location, their weight and what they are being fed, so that they can more efficiently manage their herds, said Glenn Drees, managing director, food and agribusiness at Arthur J. Gallagher & Co. in Cincinnati.
Agricultural robots are used to harvest, irrigate and weed fields.
Then there is precision farming, which uses GPS technology and satellites to gather soil information and weather data. Farmers and ranchers can analyze the information and respond, based on identified conditions, such as providing chemicals to just certain portions of a field, Drees said.
That not only boosts productivity, but also lessens the use of pesticides — a concern in consumers’ minds right now, said Tami Griffin, national practice leader for Aon’s food system, agribusiness and beverage practice in Kansas City, Mo.
Cyber Security Concerns
But as technology use increases, so does concern about cyber security.
“There is a lot of information going onto a data platform, such as seed traits, chemical usage and soil conditions,” Griffin said. “There are concerns about how that data may be used — especially in the wrong hands.”
In March, the FBI warned farmers about the risk of data breaches, including whether agricultural data could be used to manipulate the market and cause economic harm. There is also fear that an anti-GMO activist could hack into a system, gain access to the location of GMO crops and sabotage the yield.
Farmers should review their contracts with the companies that provide precision farming data services for them to determine who owns the data, and what the company does to protect the data, Griffin said.
Farmers should also know whether the firms follow best practices such as having two-factor authentication measures, how they are monitoring their systems, and how they are making sure there is no unauthorized access to that data.
Typical general liability policies would have gaps in coverage for technology risks and a stand-alone cyber policy would be needed to cover data breaches, Drees said.
“Small to mid-sized farmers may not need these policies, but they should make sure any third-party firm providing precision farming data services on the cloud has a cyber policy,” he said, adding that farmers also need to ask such firms how they safeguard information.
Farmers who have sensitive machinery embedded in their tractors and equipment should make sure they are storing it properly, protecting it from the dust or hay particles constantly moving around, Williams said.
Farmers also need a well-thought-out contingency plan if something happens to the smart equipment and they don’t have access to the data that they’ve been using to improve efficiency, he said. Business continuity insurance could come into play, depending on the type of loss.
“Certainly something such as a fire or severe weather that could damage the smart equipment could trigger coverage, but not just a temporary loss of connectivity,” Williams said.
Many agribusinesses now use solar panels to provide energy to farms, methane digesters for dairies or confinements that capture manure and convert methane gas into energy to run farms or sell back to the grid, said Julie K. Barnhil, divisional vice president at Great American Insurance Group in Cincinnati.
Jeffrey Cruey, the carrier’s divisional president, added that one of the biggest exposures from newer technologies is from mechanical breakdowns and electrical disturbances.
Failures of equipment such as tractors are not covered under a typical farm policy — which is typically covered under a vehicle policy — but separate equipment breakdown coverage will cover the failure of a GPS attached to a tractor, as well as loss of farm income.
There’s also emerging technology pertaining to “agritainment” — when farmers and ranchers provide entertainment venues, such as concerts, pick-your-own-fruit excursions, hayrides or haunted houses, said Kevin Poll, director of product development for personal property and commercial farm at ISO, a Verisk Analytics business in Jersey City, N.J., that drafts policy language that carriers can adopt for their own products.
Using drones with these activities might require separate coverage not currently provided under a typical farm policy, Poll said.
At year end, ISO will introduce policy language for a variety of endorsements that provide coverage options for farmers that engage in agritainment, and in the following year, it will look at developing language for the use of drones on farms.
“Vertical farms are a hot topic now — there could potentially be skyscrapers built that are devoted to farming in urban environments,” he said. “We’re looking at what kinds of coverage such a farm would need.”
With all of the new exposures, however, Steve Simmons, associate vice president of agribusiness risk management at Nationwide Mutual Insurance Co. in Des Moines, Iowa, emphasized that smart technologies in farming and commercial agribusiness are reducing, rather than increasing losses.
“These new technologies save lives, reduce damages and costs to property. We need to encourage farmers to make an effort to use them because they’re very good for the industry,” he said.
Technology also has a great opportunity to more efficiently use freshwater supply, which is very important in raising crops especially in drought areas, Drees said.
By 2050, the world population is expected to reach 9.6 billion — “which means that farmers will have to increase food production to feed that many people,” he said. &
Crisscrossing the ocean floor, undersea optical fiber data cables are an essential component of an increasingly interconnected world, quietly carrying massive amounts of data communications between the Earth’s landmasses.
But they are not invulnerable. Individual cables are severed or damaged dozens of times each year, most commonly by fishing boat anchors, but also by storms, scrap collectors and even shark bites.
The U.S. and other major markets, like Europe and Japan, are served by numerous cables, providing enough redundancy that traffic from a single damaged cable is rerouted before end users even notice. Wider outages, however, can have more far-reaching effects.
VIDEO: IDG.TV follows along as undersea data cables are manufactured and then loaded aboard a ship to place them in the ocean.
That’s why in October 2015, when Russian ships were observed lurking near undersea data cables, U.S. military and intelligence officials were concerned about possible sabotage.
Some experts, however, see that as unlikely.
“Cables during peacetime are protected by law under the provisions of the United Nations Convention on the Law of the Sea,” said Keith Schofield, general manager of the International Cable Protection Committee, representing the submarine cable community of interest.
Attempted sabotage, he said, would likely be detectable and stopped before any significant harm could be done to trunk cable routes.
“Before 10 or 20 percent of them were affected, owners would realize that something pretty serious was happening and could respond appropriately.”
Sean Donahue, an assistant vice president and underwriter specializing in cyber and technology at XL Catlin, agreed.
“These commercial cables have too much intrinsic value,” Donahue said. “Anybody who may have that sort of capability, such as Russia … would be hurting their own self-interest.”
Seismic activity, however, has been known to damage enough cables to cause wide service interruptions and service degradation, even in areas with ample cable connections.
A 2006 earthquake in Taiwan severed several undersea cables, causing major disruptions in Asia and ripple effects that interrupted phone service to Europe. Smaller incidents can have far reaching impacts, as well.
In 2013, a string of separate cable cuts in Egypt caused widespread data slowdowns in large portions of Africa and Asia.
And a single cut off of Northern Ireland in 2015 sparked headlines claiming it had “sent broadband into meltdown.”
When cables are cut, rerouted data can overwhelm unaffected networks, causing slowdowns even for those not directly affected. Smaller countries with less redundancy — and the companies doing business with them — can suffer substantial repercussions from such events.
Even in the U.S., outages involving multiple cables could cause data traffic to be rerouted to undersea cables on the opposite side of the country, potentially triggering domestic slowdowns along the way.
As businesses become increasingly dependent on fast data communications, even minor slowdowns can impede business. For web-centric and cloud-based companies, as well as content providers, such slowdowns could be a serious problem.
According to TeleGeography, a data cable industry research firm, Google and Bing report that minor lags lead to decreased click-throughs and search result views, and “Amazon has claimed that every 100 milliseconds of latency reduces its sales by 1 percent.”
High-frequency trading companies sometimes own dedicated data cables, but others are dependent on the same networks as the rest of us, and if those networks slow down, it hampers performance and costs them money.
Built with Redundancy
The undersea cable industry goes to great lengths to ensure uninterrupted service.
“The systems are built with redundancy in mind,” said Peter Jamieson, chair of the industry group European Subsea Cable Association.
“You should always aim to have at least two cables from each operator so that if you lose one cable … you automatically switch onto the other one. The redundancy is built into the network on the global network as well.”
Excess capacity is also built into the system. Most cables were originally built to handle optical data traffic in a single wavelength, but they now use a technique called Dense Wave Division Multiplexing (DWDM), which handles many wavelengths.
“We are now getting potentially 400 times the capacity on one optical fiber than what you probably got 15 to 20 years ago,” Jamieson said.
Routing protocols ensure that in the case of a service interruption, data instantaneously finds alternate routes. And the different cable owners work together in various consortia to operate roughly 60 cable-repair ships throughout the world, which are on call to ensure that any damage is repaired quickly. Repairs generally take a minimum of four days to complete.
But according to Helen Thompson, director of commercial marketing at Esri, a software company specializing in geographic information systems, it is not inconceivable that the individual smart systems meant to ensure seamless rerouting could have unexpected results — much the way automated trading programs can produce dramatic and unexplained lows or highs in financial markets.
“Those individual response plans come together and aggregate in such a way that they themselves might have an impact,” Thompson said.
“It’s like the butterfly effect. … That’s increasingly the nature of connectivity and a consequence of the very widespread, multi-point-of-touch communications network that we rely on.”
While DWDM vastly increased capacity on data cables, demand and usage have been steadily catching up as businesses and individuals demand and depend on more and more data.
A company called Hibernia Express recently laid a pair of superfast transatlantic cables, the first new cables in 13 years. More may be on the way.
“The content people want to have their own fibers right now,” said Jamieson.
“Can you prove that you would have made X amount of dollars versus Y amount of dollars because of a degraded service?” — Sean Donahue, assistant vice president and underwriter, at XL Catlin
“So the Facebooks, Googles, Amazons and Microsofts of this world … they want to have their own fiber to control their own traffic on cable, so they are driving a lot of new systems as well.”
It is a sign of how seriously data-driven businesses take their dependence on fast, dependable transmission infrastructure.
As data usage skyrockets, Thompson cautioned against taking network resiliency and capacity for granted.
“We could be in a situation where ‘out of sight, out of mind’ [and] all these things are running at 99 percent capacity, and we’re one point … away from total failure.
“We don’t know. I’m not suggesting that is the case, but it behooves us to provide evidence that we have redundancy and resilience in the systems that we’ve become reliant on. We increasingly are engineering our future to be more dependent on them.”
Smart houses, self-driving cars, and other web-dependent gadgets and systems will not only add to data traffic, but to the list of systems that could malfunction in the case of outages and slowdowns, opening new areas of risk for homeowners, as well.
Protecting Data Flows
Traditional business interruption coverage focuses on perils like flood and fire, power outages and physical infrastructure failures.
“But, when we move to businesses where data is a utility, we have a different sort of business interruption, and that is going to be increasingly important to service-based economies,” said Thompson.
“We think about site liability and data breaches, but what I think we’re going to start moving to more and more is providing business interruption insurance around data.”
Cloud coverage insurance is still a rarity, but probably not for long. “Many more companies should think about cloud computing insurance,” she said.
“It will become a vital part of what’s included in business interruption insurance.”
Businesses should know their providers’ contractual obligations and dependent business interruption coverage in case of outages, as spelled out in the service level agreement, she said.
“More and more major businesses are expecting that as part of their service level agreement,” Thompson said.
“I think that will become an integral part of the transfer of risk and liability. If you’re completely dependent upon the web and the cloud to do business, and you don’t protect yourself with a service agreement on the cloud provider, you’re going to be subject to claims from other people. So, that discussion with your insurance provider should be absolutely central.”
Even with coverage, however, calculating business interruption losses, especially for traders and other market-dependent businesses, can be extremely difficult, particularly during incidents that may themselves be roiling the markets.
“Can you prove that you would have made X amount of dollars versus Y amount of dollars because of a degraded service?” Donahue asked. “There’s a lot of moving parts to that scenario.” &
To Keep Cool in a Crisis, Companies Need a Comprehensive Solution
Threats against corporate security come in many forms, from intentional acts of violence to civil unrest to cyber-attacks. The perpetrators don’t discriminate by company size or sector, and the consequences can range from several thousand dollars lost to several lives lost.
The recent shooting in an Orlando nightclub that killed 49, for example, or last year’s San Bernardino shooting that killed 14, are somber reminders that terrorism and violence can erupt anywhere and in any type of business. In addition to loss of life, violence can translate into business interruption and property damage. In Ferguson, Mo., riots lead to over $4 million in property damage.
Cyber-attacks have also become commonplace, with hackers infiltrating private networks to steal data or hold it ransom.
Is your organization prepared for these risks?
“A lot of companies have a crisis response plan on paper, but they don’t have outside resources to come to their aid if there is an incident,” said Reggie Gibbs, Underwriter and Product Manager, Starr Companies.
Mid-size companies especially tend to lack comprehensive insurance coverage and crisis management services for a variety of security events due either to limited resources or an underestimation of their exposure.
Starr Companies’ Cyber and Terror Response (CTR) solution provides three coverages as well as crisis response services tailored to meet the needs of these companies. Each of its components addresses a common security threat.
“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them.”
— Reggie Gibbs, Underwriter & Product Manager, Starr Companies
Terror and Political Violence
“Political violence can be defined as a strike, riot, protest, or any type of unrest that gets out of hand and turns violent,” said Gibbs, who specializes in terrorism and political violence, workplace violence, and crisis management.
In the case of the Ferguson protests, any first party property damage or third party liability incurred by the disruption would be covered under the terrorism and political violence segment of the CTR solution.
In the case of a terror attack, organizations cannot necessarily rely on TRIA to pick up property losses. In the case of the Orlando shooting, for example, the likelihood of TRIA being invoked is low because property damage will not meet the threshold for coverage to kick in.
TRIA, reauthorized in 2015, provides a federal insurance backstop in the event of a terror attack. The U.S. Secretary of the Treasury, U.S. Attorney General, and U.S. Secretary of Homeland Security must declare an attack to be an act of terrorism, and property damage must exceed $5 million to trigger TRIA.
“We would still view the Orlando shooting as an act of terror, however, because of who the shooter claimed he was working for regardless if the ties to terror groups are clear or not. Therefore, our coverage would apply,” Gibbs said. Even if TRIA was enacted, however, companies would still have a lot of pieces to pick up following an attack. They may have injured or deceased employees, or face legal action from third parties.
For these situations, and any other incident of violence not driven by terrorism, the workplace violence component of Starr’s CTR solution would act as an umbrella to cover other liabilities such as legal liability, loss of life benefits, psychiatric care, and other crisis response services.
One such incident struck a Boston-area Bertucci’s in early May. An attacker wielding a knife drove his car into a Boston shopping mall before making his way into the nearby restaurant. He killed five, including restaurant workers and patrons.
“There was no ideological or political motivation behind it. He was just deranged.” Gibbs said. “Our workplace violence coverage can handle the loss of life benefits for both the employees and patrons killed in situations like this one.”
In the best cases, though, violence can be prevented altogether.
“If an employee reports a stalking threat, the policy would cover the expense of security guards,” Gibbs said. “In this case, it’s more of a pre-workplace violence coverage. It would de-escalate the situation.”
Attacks can also be non-physical.
Cyber extortion in particular is on the rise. Phishing scams lead employees to click on malicious links, unknowingly downloading ransomware onto their internal networks. The cyber criminals then hold companies’ networks ransom, asking for a sum of money in return for the release of data or to prevent a business interruption. The ransoms can be low — amounts that organizations can afford to pay.
“The hackers don’t want to attract the attention of law enforcement or regulatory agencies,” said Annamaria Landaverde, National Cyber Practice Leader & Professional Liability Underwriting Manager, Starr Companies. Landaverde specializes in the cyber component of the CTR coverage. “The FBI may not get involved if someone asks for $5,000. They are more likely to get involved if someone asks for $5 million.”
Since companies are not required by law to report cyber extortion —like they are for data breaches — many choose simply to pay the ransom and move on without generating any negative news headlines.
“The hackers don’t want to attract the attention of any law enforcement or regulatory agencies. The F.B.I. won’t get involved if someone asks for $5,000. They will get involved if someone asks for $5 million.”
— Annamaria Landaverde, National Cyber Practice Leader & Underwriting Manager, Professional Liability Division, Starr Companies
“A California medical center recently had an incident like this where the hackers asked for $17,000 in ransom,” Landaverde said,” but the amounts can vary.”
While the ransom itself may seem manageable, many companies fail to recognize other costs associated with the identification and removal of the malware from their system. There may also be costs associated with forensics investigations, legal experts, public relations firms, third party lawsuits, and notification and credit monitoring.
“The cyber arm of the CTR coverage extends to liability that an organization would suffer as a result of a breach, or failure of security of the insured’s network,” Landaverde said. That includes not just cyber extortion, but outright data theft or denial-of-service attacks.
Crisis Management Services
“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them,” Gibbs said.
The fourth component of Starr’s CTR solution – crisis response — provides two outside consultants to insureds, with one specializing in “hard” security services like guards or instances of cyber extortion, and another focusing on crisis communications.
Without these outside services, there is only so much insurance can do in the aftermath of a crisis. Experienced consultants provide a range of security preparedness and response services to complement coverage and help insureds recover from an episode of violence or cyber event.
“From a communications perspective, our consultants can manage the public relations front to create clear and consistent messaging, but they can also stay in touch with families after a terror or other violent attack to make sure everyone stays informed,” Gibbs said.
They also serve as a first point of contact for insureds immediately after an event. If they need guidance quickly, consultants await at the ready.
“When a client purchases the product, they get a 24-hour hotline set up with one of our consultancies,” he said. “They can report an incident at any time, and our consultant will help either resolve a situation or deal with the aftermath in whatever way they can.”
While the Cyber and Terror Response package provides a comprehensive solution tailored for mid-size companies, Starr also offers standalone cyber liability and crisis management coverage on a primary and excess basis.
“For companies with greater exposure to a particular type of risk, or who simply want higher limits or greater customization, we have those standalone polices.” Landaverde said.
For more information on Starr Companies’ Cyber and Terror Response solution, visit https://www.starrcompanies.com/Insurance/CyberAndTerrorResponse.
Starr Companies is the worldwide marketing name for the operating insurance and travel assistance companies and subsidiaries of Starr International Company, Inc. and for the investment business of C. V. Starr & Co., Inc. and its subsidiaries.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Starr Companies. The editorial staff of Risk & Insurance had no role in its preparation.