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Agriculture is going digital. It’s allowing farmers to reduce costs, manage risk better and improve outcomes. With a higher level of insight, there is a growing opportunity for insurers to weigh in, teaming with new partners to offer new risk models and types of insurance for an increasingly sophisticated sector.

While agri-insurance is not as lucrative as property and casualty or life insurance, the technology revolution in the agriculture sector offers new solutions to old problems. New insurance models, informed and driven by digital technologies, offer both the farmer and insurer better odds.

Drones, sensors, big data interconnects, advanced analytics, easy-to-use mobile apps, and high-tech intelligent farming, processing and packaging equipment—these elements are being combined by various actors, from governments to equipment manufacturers, agri-suppliers, agri-tech players and insurers, to put informed decision-making at the modern farmer’s fingertips.

As the cost of digital-agri technology drops, new ecosystems are forming.

The digital-agri revolution has only just begun, however. Today, less than 20 percent of acreage in the US, for example, is managed using digital-agriculture technologies due to the high cost of gathering precise field data. This is changing as the cost of technologies drops and new ecosystems begin to form. There is an important role for insurers to play within these ecosystems.

Title: Evolution of Digital Agriculture Source: Accenture

Core market dynamics – the opportunity

Farming is high risk as outcomes are dependent on unpredictable weather and other external factors. Cost-conscious farmers assess cost rewards carefully and the level of investment required for insurance has left many uninsured. This is a big challenge for smallholder farmers as a single disaster can wipe them out. New technologies are presenting new insurance value propositions, however.

Farmers, governments and industry players are—often in new partnerships—harnessing digital technologies to develop innovative new intelligent solutions that address risk factors more directly, dynamically and affordably.

In agriculture, there’s opportunity in a few key areas of digitization:

• Job-cycle and in-field decision support, including automated equipment integration for advanced farmers.

• Reaching millions of smallholder farmers to improve agronomic practices and increase access to finance.

• Supply and demand intermediation to support sustainability and in-spec production standards (certified agriculture).

As part of the ecosystems providing these solutions, insurers can begin to provide agri-insurance that is tailored to farmers’ very specific needs. Informed by big and realtime data, the farmer and the insurer can adapt their cover dynamically based on changing risk and the actions taken by the insured to mitigate that risk. In addition, as part of an agri-tech ecosystem, there is great value for the farmer in that everything simply goes faster, from equipment repairs to claims payments (e.g., in case of hail storms), to identifying and addressing epidemics, and receiving warnings.

For market players, the resulting revenue streams from these emerging digital solutions include direct charges to growers for productivity increases, a share of wallet increase through better marketing and product development based on better market and crop production insights, and fees paid by the food chain for certified yields.

New approach required

While no dominant agri-platforms have emerged and the market remains very fragmented, agri-players—including agri-insurers—that want a share of the market for digital-agri solutions will need to take a new approach as solution design and delivery require new capabilities and strategic partnerships.

Collaboration with leading farming companies will allow insurers to expand their ecosystem – opening up new opportunities.

It benefits all players:

• Insurers gain access to data, increase their relevance in new fields of service, and are able to help decrease under-insurance, increase productivity and decrease risk.

• Farmers gain access to an easy-to-buy insurance service, efficient processes, and guaranteed returns on specific offerings.

• Partners’ acquisition costs are lowered, their customer base is widened, and new distribution channels open up.

The partner ecosystem insurers build will also enable differentiation.

Join me next week as I explore the ecosystems that are already forming and how insurers are contributing.

Learn more about Accenture’s Digital Agriculture Service, the Accenture Precision Agriculture Service and the Accenture Connected Crop Solution.