Crop damage estimation based on the linkage of meteorological and FADN databases

The natural risks have been considered the most important source of crop damages in the Hungarian agriculture for a long time. In spite of this fact due to the lacking supply of insurance in the last 20 years the farmers could not contract insurance policies to cover the most important crop damage risks as drought, inland waters and spring frost. Moreover the penetration of insurable risks for instance the hailstorm has not covered 40 percent of the arable land in none of the years of the analyzed period. The NAR (National Crop Damage Compensation System) founded in 2006 has extended the eligible risks to cover farmers’ damages, but the compensation reached only 10-20 percent of crop damages in the last two years. The solution could be a new system based on the combination of the risk portfolio of the NAR and of the insurance companies subsidized by the government. This paper proposes a new crop damage estimation method which is based on the linkage of databases provided by FADN (Farm Accountancy Data Network) and OMSZ (Hungarian Meteorological Service). In this way the losses caused by adverse selection and moral hazard can be prevented.