Agriculture Insurance
The next blue ocean for insurance carriers and startups
The next big trend for insurance carriers to take advantage of is the digitalization of agriculture. In fact, several big tech players such as Microsoft and Google have already addressed this shift in agriculture with Microsoft inaugurating a new program called FarmBeats. This program helps farmers increase their yields through the use of drones, AI, and other technologies. The tech giants are clearly making a statement about how fundamental this trend is for current and future generations:
Farmers worldwide are finding it challenging to manage their operations. Traditional reliance on trend data is no longer sufficient. Instead, these challenges can only be tackled through the consistent use of new technologies that can empower the daily operations of farming. As other industries move to embrace smart ways of data collection and constant process monitoring through the use of IoT technologies, the agriculture business is beginning to follow suit. In order to understand the importance of deploying new technologies within the Agri world, it is important to analyze the multiple risks that farmers face:
What will be the role of insurance carriers and governments within this disruptive trend?
Collaborations among insurance carriers, governments and startups are necessary to build a reliable ecosystem that all players can thrive in. A successful insurance carrier will need to provide additional value that goes beyond the basic offerings of an insurance policy. Becoming an advisory partner to farmers and helping them understand and mitigate risk will go a long way for both policyholders and risk carriers alike. New agri-tech solutions are enabling agri-companies, governments, and insurers to recalibrate their roles. Smart farming techniques will enable insurers to gather more data and help farmers prevent the risks previously mentioned, thus creating a strong value chain to partner with the Agri sector and deploy new advanced coverage products.
Since crop insurance has high costs and low yields, the intervention of governments may be necessary. The government’s involvement in this ecosystem may help assure that the right coverage for these types of risks is applied. Further information will be provided throughout the article to provide some insights into the current status quo of government subsidies for farming insurance.
The Ecosystem
An overview of the key players within the Agri-tech ecosystem Insurance Carriers: to insure crop outcomes, assets, and infrastructure supply chain (storage, transport, import, and export) outcomes, liability and business outcomes.
AgTech Startups: to deploy the right solutions and technology to make this industry smart and to predict in advance possible losses using IOT visual image, AI and machine learning technologies.
Governments: to provide subsidies to farmers in order to cover their risk, due the high cost of the farming market insurance.
Food & Chemical companies: to gather data on the efficiency of the crop, the status of the field, improving the efficiency of their products (chemical companies) and the quality of their outcome (food companies)
Farmers: to hedge from climate disasters, price volatility and production
Trends and numbers
The most recent statistics from different countries and several institutions show a steady increase in insurance premiums within the farming segments. In most of these countries, agricultural insurance represents one of the largest non-life lines of business and Multi-Peril Crop Insurance products (MPCI), accounting for at least 90% of the market.
In regards to Europe, 12 out of 28 member states have programmed instruments of the risk management toolbox for 2014/2020, with a total public expenditure of €2.7 billion targeting 636,667 farm holdings.
In India, the premiums saw a 300% increase since the introduction of the government subsidies in 2016, therefore increasing from US $850 million up to US $3.3 billion. Eventually the market, which has grown the most in terms of size and land coverage is China, with premiums increased dramatically to US $6.3 billion in 2016 from just US $110 million in 2006.
The forecast of the market growth for this insurance segment ranges from 10%-15% or even 20% annually.
How technology advancement can empower agriculture insurance
The progression of technology has helped farmers gather more data, increasing the knowledge available for farmers and opening doors for the creation of new products by insurers.
Solutions that cover the whole cycle, from seed to harvest
Technology is now central to every industry, with new developments constantly ready to be deployed across several businesses. This article aims to open the doors to a new way of thinking about insurance, showing how insurers can eventually become advisors for their customers. The agri-insurer can be a discrete yet everyday risk manager who is deeply integrated within the ecosystem. This agri-insurer will define business not only through claims but in preventing them. Using the vehicle of technology and its multiple applications, we can help explain how crop insurance and smart farming work together to reach certain common goals.
It’s complicated when it comes to analyzing how technology will disrupt both the insurance and agriculture industries.
The same cutting edge developments can be applied to both insurance and agriculture industries, from the risk assessment to post damage analysis for the insurers, and from the pre-seed analysis to the final distribution of the product for the farmers. Several steps are involved in this process but the technologies/solutions deployed are able to automatize each of these steps. We are featuring some of the most promising startups along the agri-tech value chain in the following sections.
How InsurTech and AgriTech can work hand in hand
Featured Startups
Description:
Peer-to-peer investment and insurance platform intended to offer low-cost crop insurance to farmers. The company’s platform uses remote sensing and sophisticated risk modeling to protect from losses due to natural disasters, enabling low-income farmers to access affordable crop insurance in a simplified manner. At the end of the first season, WorldCover was concerned with maintaining a relationship of trust with farmers. By the season’s end, one of seven communities with customers received the insurance payout, although a second community claimed that they should have received the insurance due to drought. The farmers’ claims conflicted with the satellite weather data, which showed requisite rainfall for the season. One of the main learnings — as the Founder Chris Sheehan, explained — was that the weather data is imperfect, which is true of many insurance products. Therefore, weather data are now communicated to the customer in real-time, at least on a week to week basis, which allowed Worldcover to resolve any potential disputes or problems with the data.
Use Case:
WorldCover approached the communications challenge from two directions. First, better understand the customer base. Second, communicate to the customer base with greater frequency. Both approaches increased trust in the product and WorldCover brand, leading to higher retention rates. Worldcover has to deal every day with three main categories of users, the one who owns a mobile phone and is literate in English and French (50%), the ones who have a phone and are literate (20%) and those without a phone (50%). Considering its customer-based, Worldcover has developed a solution tailored to three different segments:
Group A: SMS in either English or French via a global messaging app (Twilio). Local languages do not use SMS to manage complexity for WorldCover communications.
Group B: A voice message recorded in the local language via a global messaging app.
Group C: Weekly group meetings led by a community representative, who either plays a message recorded in the local language or repeats that message to the group.
Description:
Tarla.in harnesses diverse agriculture-related climate and field-level data to produce highly accurate, hyper-local field risk assessments and claim verifications. This help preventing losses to fraudulent claims and information asymmetry for insurers and monitoring seasonal cultivation and risks for financiers.
Agriculture insurance payouts reach $30 billion every year. Insurance losses due to fraud and lack of actuarial data cost about 10% of the covered losses. Field expert costs are also high due to frequent site visits and a complicated data gathering process. Additionally, Agri corporates and financiers cannot monitor what is going on in the field in real-time which eventually leads to a lack of accurate information available to the landowners. Tarla.in harnesses historical and real-time agricultural climate and field data to support decisions of creditors and insurers.
Use Case
Tarla.in's initial customer, Tarsim, verifies claims with its digital data and insights and saved thousands of euros every year. To test out this technology, Tarsim gave Tarla.in the opportunity to verify a large fire in a wheat field. Tarla.in noticed harvest just one day before the fire event via its satellite data. Hence Tarla.in advised the company to reject the claims where otherwise they would cost 100K€ payouts. The amount Tarsim paid for Tarla.in services was a fraction of the saved amount.
Description:
CropIn is a leading full-stack agri-tech organization that provides SaaS solutions to agribusinesses globally. CropIn uses big data, machine learning, and artificial intelligence to enable its clients to analyze and interpret data to derive real-time actionable insights on standing crops and projects spanning geographies. We help organizations with their initiatives around digitization, predictability, compliance, sustainability, and traceability.
Use Case
The Customer: The Sustainable Livelihoods and Adaptation to Climate Change (SLACC) Project for India, in association with the Government of India’s National Rural Livelihoods Project (NRLP), and supported by World Bank, aims to empower farmers to adopt climate-resilient practices and adapt to the climatic changes and unpredictability.
The Challenges: Adverse climate change is a threat to sustainable farming. It leads to soil degradation, a drop in crop yield and lower quality produces, and increases the incidence of attacks by pests and insects. As per an ICAR report, a reduction of up to 9% in agriculture yields is expected in the medium term (2010–2039). This calls for the swift adoption of climate-resilient agriculture practices.
CropIn’s Solution:
- Climate-smart advisory module
2. Weather-based advisory in local language
3. Web and mobile-based advisory dashboards for insights & decision making
4. Technical inputs in real-time
Description:
FloodFlash enables fairly-priced, no-exclusions, instant-settlement flood insurance. Customers receive a pre-agreed settlement as soon as the FloodFlash sensor detects that waters have exceeded a critical depth. An algorithm is used to set tailored prices meaning that for the first time, personalized and competitive flood policies can be written for the highest-risk locations around the world.
Use Case
A commercial insurance broker was unable to source affordable coverage for clients located in a high flood-risk area of the UK.
What they did: FloodFlash created a pilot scheme for the broker’s clients. Each business selected trigger depths and settlement amounts that were appropriate for them. Several had previously installed physical flood barriers to protect them against smaller events, allowing FloodFlash to offer the clients competitive premiums.
Impact: The broker’s clients could afford protection against floods.
More Agri tech startups in our ecosystem:
matteo@pnptc.com
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