The PSD/FSD field visit was focusing primarily on the hail insurance cooperative Swiss Hail. This private company – the only one of its kind in Switzerland – specializes in insurance for crops against various kinds of natural hazards. 76% of Swiss farmers are insured with Swiss Hail, and the company holds a de-facto monopoly in Switzerland.
Hansueli Lusti, Swiss Hail
Hansueli Lusti, Deputy Director of the insurance, gave us an overview of how the organisation operates, and why it is successful. The key features of the business model are the following:
- Swiss Hail is a mutual insurance based on a cooperative organisational model. Every farmer who purchases an insurance product from Swiss Hail automatically becomes member of the cooperative. The organisation is not profit-driven, and surpluses are redistributed among members at the end of the year.
- Swiss Hail has a lean organisational structure with only 28 fixed employees for 35’000 insured farmers. Agents and cost adjusters are recruited among the insured farmers, and work flexibly and part-time, depending on the needs. Thanks to this structure, the organisation has low operational costs of only about 13% of FL, whereas big insurance companies usually are around 20%.
- The specialization on crop insurance requires fast and flexible loss adjustment capacities: damaged crops transform relatively quickly after a weather incident, and the capricious nature of weather events can lead to a large number of farmers reporting losses at the same time. For this purpose, Swiss Hail has built up a network of almost 400 loss adjusters among its members that work flexibly on demand. Since these loss adjusters are farmers themselves, they are experts on crop damages and more respected among the insured farmers than loss adjusters from general insurance companies would be.
- Mr. Lusti repeatedly highlighted the crucial importance of good data. Swiss Hail has been keeping track of the highly volatile loss ratios since several decades and uses this data to calculate the risk of damaging weather events down to the municipality level. The dynamic development of weather risk due to climate change – Switzerland is warming particularly strongly – is also closely observed. Insurance premiums are calculated on the basis of the hail sensitivity of the crops and the hail sensitivity of the municipality, and include a bonus/malus system based on the number of damage-free years of a farmer.
More detailed information can be found in Mr. Lusti’s presentation slides:
[slideshare id=21177370&doc=ppt-schweizerhagelhansuelilusti-130514152105-phpapp01]
Trouble viewing? Try fullscreen mode or download the PDF here: Swiss Hail [PDF]
Audio Schweizer Hagel
During the field visit, we first visited the family farm of Hans Kupferschmied in Heimenschwand, who is himself both insured with Swiss Hail and an agent and loss adjuster for the company. After having enjoyed a delicious apéro with products from his farm – accompanied by traditional Swiss alphorn and harmonica tunes from four local musicians – we were given a tour of the farm. One particularly noteworthy aspect of Mr. Kupferschmied’s business is the level of diversification. Besides farming – which generates about half of the family’s income – Mr. Kupferschmied also works in forestry, selling heat produced with wood pellets from his forests to several households and a church in the neighbourhood, and works for Swiss Hail. His work as an agent and loss adjuster for Swiss Hail generates about one tenth of his income while taking up 15 percent of his days. His main motivation for working on this job is his strong personal conviction that the cooperative insurance model with policies specifically tailored by farmers for farmers is a great idea. He is himself active in eight cooperatives.
On the Kupferschmied family farm
During the Q&A round, some more success factors of Swiss Hail were discussed:
- To prevent insurance fraud, loss adjusters are only called to adjust losses outside of their region.
- Loss adjusters are recruited by Swiss Hail and trained for 3 years. They always visit farms in pairs to ensure fair loss adjustments, and are equipped with a guideline handbook and instruments by Swiss Hail to explain to farmers how they arrive at the final adjustment. Despite these guidelines, Mr Kupferschmied said that loss adjustment inevitably is partly a negotiation process; due to the organic nature of the insured matter, there is no definitive way of estimating exact losses. This makes loss adjusters with experience in farming all the more important.
- Swiss Hail has expanded largely on the basis of mouth-to-mouth propaganda among farmers.
As an insured farmer himself, Mr. Kupferschmied has reported 8 losses since he joined Swiss Hail in 1984, and he says that premium payments and indemnities received are in a relation of about two thirds to one third in his case. Nonetheless, he feels the constant small payments hurt less than the punctual high loss caused by a natural disaster and extreme weather events.
Field Visit 2: The Aeschlimann/Oesch Farm
The Aeschlimann/Oesch joint farm
In the second part of the field trip, we visited a farm that is jointly held by the families Aeschlimann and Oesch, and distributed over four different patches of land, the largest of which is an alpine pasture that is only used during four months in summer.
Like in the case of the Kupferschmied farm, the income diversification strategy is striking. Each of the four partners relies on other income sources besides their farming business: the Oesch brothers both work full-time for a milking machines company and a trust in Berne respectively and only help out on the farm when needed; of the Aeschlimann family, Bernhard works 40% in agricultural consulting, Marianna works 30% as a cook, and their son Martin works 40% in forestry besides farming. The income from the farming business is shared according to how many days each partner has worked on the farm during the year.
The farming partners
Coming back to hail insurance, the farming partners are part of the 24% of Swiss farmers who have chosen not to insure their crops with Swiss Hail: the geographical distribution of the farming land reduces the risk of suffering devastating losses, and because the farmers specialize in lifestock, rather than hail-sensitive crops, their vulnerability to weather events is relatively low.
Find a short description of the farm here: Field Visit_Short Description Farm Aeschlimann [PDF]
“What I found really interesting today – and what I think could be interesting for the context of Serbia – is the insurance scheme. Like in Switzerland, we have quite some farming land where people grow various sorts of crops, including berries etc, but farmers are not insured. When hail comes, it destroys everything. Average insurance for Serbian farmers is about €30, which is about the cost of a monthly phone bill, so it is very affordable. The problem is that insurance companies do not have tailor-made insurance products specifically for farmers. Switzerland is already supporting the development of such insurances in Serbia through the Southeastern Europe Catastrophe Risk Insurance Facility. Looking at the model of Swiss Hail, I think a similar philosophy could be applied in Serbia’s agriculture. This would of course help farmers: they are eager to purchase crop insurance, but they simply do not have such tailor-made models available.”
– Arminio Rosic, SDC Serbia
My impressions from the field trip – I would like to say that it was very useful and interesting to me to see the example of the livestock sector in Switzerland, because our programme is working in the same sector in Georgia. However, the farm management and the structure are different.
Insights that could be relevant for our context in Georgia: first of all it was very interesting to find more information on how the hail insurance structure works in practice and what the benefit for local farmers is. It is not quickly replicable for Georgia, but the structure and system of Swiss Hail could be used as the example in development of agriculture insurance system in Georgia.
The most useful lesson for me from the field trip was the insight into farming management. The Kupferschmied family started their farming business more than 100 years ago with only a small number of cattle. But the success of the family is ultimately based on diversification of the business. This example of diversification could be replicable for Georgian farmers so as not to be focused only on the development of one sub-sector (i.e. livestock).
- George Sadunishvili, Mercy Corps Georgia
The following two questions guided the group through the field visit, and were discussed in small groups (mixed with the PSD groups) of 8-10 participants after the field visit:
- From what you have seen and heard today, where do you see the potential learning that could be beneficial for your own project/programme/work context? Where do you see any leverage points? What could be useful for the programs in the country?
- In what you have seen and heard today, how are results measured and communicated at different institutional levels? For example: Do the VET actors – the vocational school, the firm, the association – know about the career paths of their trainees? Do they support them actively in their career paths?
Find some of the groups’ responses here.
