Cedric Stephens | Resolving underinsurance with high-tech

Last Sunday’s lead story in this newspaper’s business section was about one of the recurring risks that local farmers face. Criminals were said to be now using high-tech tools to help steal farm produce. Absent from the article were metrics about the scale of the problem or new plans to mitigate the risks other than a comment about the minister of agriculture’s “multi-pronged approach (whatever this means) to combat praedial larceny”.

A few days later, an editorial writer provided an estimate of the theft losses. They amounted to 10 to 20 per cent of total farm output or over US$55 million ($8.6 billion) a year. These are big numbers and can be compared to the Planning Institute of Jamaica’s damage estimates for losses as a result of hurricanes, floods, and droughts which have averaged two per cent of GDP per year since 2001.

The editorial argues that use of the phrase praedial larceny to describe these criminal activities is inaccurate and outdated. The term suggests “petty hustlers snatching small amounts of crops from fields”. This is no longer so. Sophisticated, organised criminals are now involved in business enterprises, and they use complex supply chains to get ‘their goods’ to market.

The implication: the use of old-time tools to combat modern criminal networks is guaranteed to fail. Fresh thinking and modern tools are required.

Last Wednesday’s The Gleaner reported that the Ministry of Education had forged a partnership with satellite provider Starlink. The agreement is to connect rural public schools with high-speed internet services. Guess what? 21st century tools are also available to wage the fight against organised criminals who have targeted the farming sector.

Research suggests that satellite technologies, using Starlink or some other service provider, can play a crucial role in protecting farms from thieves, by providing real-time surveillance, tracking, and predictive analytics. Predictive analytics is a branch of data analysis that uses historical data, statistical modelling, and machine learning to forecast future outcomes.

The technique can be used to forecast periods and areas when thieves are likely to be more active, and appropriate security measures implemented. Is this idea feasible? Over to you, Minister Floyd Green!

The CEO of a local property-valuing company wrote a piece last Wednesday about the need for individuals and companies to conduct regular property valuations against the backdrop of the approaching hurricane season.

“Too many (property insurance) policies are still based on valuations that no longer reflect the actual cost of rebuilding. With inflation, construction cost increases, and ongoing supply chain delays, replacement values have gone up across the region. If your property is not properly valued, your insurance coverage may fall short when you need it most,” she wrote.

The writer’s solution is a modern approach to addressing the recurring problem of underinsurance. Many property owners spend time complaining about the average clause while ignoring or underestimating the risks that their property faces from natural disaster events. They know little about Jamaica’s geography and the increased threats that Caribbean islands like ours face because of climate change.

This is not surprising. The Caribbean is a disaster-prone region, yet CXC geography is not mandatory in high schools, and the number of students sitting for exams in the subject is not increasing.

Insurers emphasise the impact of the average clause and do little to stimulate an increase in the demand for property insurance. However, they are not shy about recommending regular valuations for motor vehicles where values decline, but seem reluctant to do the same for buildings where construction costs are always rising.

The building valuation expert’s primer did not discuss the ripple effects of the on-off Trump administration’s tariff regime on the United States’ insurance industry generally, and construction costs in catastrophe prone states like Florida, specifically; nor did the article discuss local currency fluctuations as compared to the US dollar. It is probable that these factors are likely to affect local construction costs.

Artificial intelligence – another high-tech tool – is revolutionising cost estimation in construction and rebuilding projects. The jobs of property valuation experts, like the one previously referred to, will soon be taken over by AI because these tools can: analyse historical construction data, material costs, and labour trends to provide precise rebuilding cost estimates; scan blueprints and automatically calculate the required materials, reducing human error; forecast potential cost overruns based on past projects and market conditions; and allocate resources efficiently, ensuring projects stay within budget.

This article did not start life with the aim of seeking a high-tech solution to the problem of praedial larceny in Jamaica or to forecast how tech can and is being used to calculate accurate values for property insurances. Its aim was to provide two examples to show how high-tech tools can be employed to mitigate some of the risks in farming and reduce underinsurance.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com