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The technology used in agriculture is evolving rapidly. Use of farm management software, smart irrigation, drones and robots, precision agriculture and predictive data analytics, sensors, and integrated marketplace platforms are addressing some of the key challenges faced by governments, growers and insurers. Carriers able to leverage the capabilities of the digital-agri ecosystems that are emerging, have the opportunity to lead an agri-insurance (r)evolution.
Digital technology is a game-changer for agri-insurance. It is addressing key challenges:
Climate change—Increasingly erratic weather and global warming threaten livelihoods and food security. Traditional reliance on historic and trend data is no longer sufficient. Realtime global weather and satellite data is now accessible to multiple players in the agri value chain, with analytics ensuring greater insight to drive decision-making that lowers risk and increases outputs.
Supply chain—Insurers, traditionally focused on meeting losses from natural or other disasters (hail, drought, disease) are seeing the growth of risk in areas such as contractual disputes, product recalls, and tougher regulatory measures within every segment of the supply chain.
Lack of coverage—Globally, agri-insurance coverage is low. This is primarily due to the cost of cover. Answers are arriving, backed by digital technology.
- Governments are subsidising crop insurance and some, like in India, are using digital technology to lower risks. In a dig-in.com article, the USDA’s Leann Nelson notes that with better weather and crop-history data, the US government can develop risk-protection tools. “It all comes down to data,” she says. “We have to have the information for what risks crops face to create a product that’s actuarially sound.”
- Other solutions, based on innovative insurance models, are also coming to the fore. A Spore article highlights that the digital delivery of insurance policies, increasingly bundled together with input loans or including a loan specifically to cover the premium, is also cutting insurance costs and lifting availability. In Zambia, NWK Agri-Services offers insurance to cotton farmers, delaying payment of the premium until after their harvest. In Paraguay, GIZ plans to roll out credit-linked weather insurance based on satellite data to smallholders.
New insurance models needed—Traditional ‘boots in the field’ agri-insurance processes are inefficient and inaccurate. Classic risk models using trend data are also no longer relevant.
Index-based insurance (IBI) reduces the need for costly risk adjustment. IBI makes use of realtime data from satellites and ongoing risk assessment, with payouts triggered by thresholds beyond which agricultural production begins to suffer. It serves the smallholder well.
How are leading agricultural players positioning themselves within digital-agriculture ecosystems and what role can insurers play? Data, equipment, technology and financial services providers, governments and new entrants are all participating.
New agri-tech solutions are enabling agri companies, governments and insurers to recalibrate their roles.
Governments and industry bodies
Governments and industry bodies, recognizing the incredible potential of digital agriculture, are leading the way.
Australia’s National Farmers’ Federation has launched the NFF Digital Agriculture Service. It comprises an online platform that gives growers access to vast quantities of data, as well as access to tools that supply realtime data to drive high performance farm management that generates higher yields and lowers input costs.
In India, the government’s Pradhan Mantri Fasal Bima Yojana farm insurance scheme hopes to increase coverage to 40 percent this year. Use of technology is a major part of its operations. One year after its launch, it is being refined. The focus is on increasing competition among insurers, lowering the average premium and widening the scope of cover to include losses due to natural disasters. To achieve this affordably, it is engaging with companies like SatSure. The company uses historical and current satellite imagery, along with local socio-economic and commodity pricing data (a mix of big data, AI and analytics) to reduce the risks associated with weather-based farming, help farmers get agricultural credit and insurance, and improve settlement times.
Is India’s scheme lucrative for insurers? This report suggests it is.
Agri leaders’ ecosystem plays
Monsanto is making a big digital-agriculture platform play. To help farmers increase crop productivity while conserving water and energy, it purchased Climate Corporation, a company which has used remote sensing and cartographic techniques to map all 25 million farming fields in America by field shape, type of crop, crop yields, soil capacity and other critical metrics. Climate Corp’s nitrogen monitoring tools help farmers build customized management plans for each field to optimize their inputs and maximize productivity. By adding Climate Corp’s data to Monsanto’s data on seed yields, farmers can better understand which seeds will grow best in which fields and under what conditions.
And Monsanto is far from done building its digital-agri ecosystem. Climate Corp has, for example, opened its platform to other agri innovators to build upon, complementing its digital tools with additional data layers. A recent addition is Koch Agronomic Services, with its nitrogen stabilizer and fertilizer products. Its product research data will help refine the data science models that power Climate Corp’s Climate FieldView digital-agriculture platform.
The negatives of ecosystem and precision or prescriptive agri plays include some concern about exclusionary digital-agri platform tactics as suggested by the combination of Bayer and Monsanto’s digital farming platforms creating unfair advantage. There is potential for conflict among stakeholders, and also privacy and competitiveness concerns as farmers question potential misuse of the stream of detailed data they are providing on their harvests.
Within digital-agri ecosystems, insurers may insure crop outcomes, assets and infrastructure, supply chain outcomes, liability, and more.
Potential role of insurers within ecosystems
Within these ecosystems there’s opportunity for insurers to insure crop outcomes, assets and infrastructure, supply chain (storage, transport, import and export) outcomes, liability, and business outcomes.
As part of an ecosystem of digitally-driven agriculture sector players, insurers could potentially offer services that would include:
- An insurance protection marketplace
- Farming risk scores for protection-product providers
- Automated farming risk underwriting
- Financing of seeds for farmers
- Seamless claims handling and equipment repair
- Guaranteed outcomes for farming activities
Key capabilities insurers would need to develop to offer these services would include:
- IoT data-driven risk assessment and automated underwriting
- Partnership management and easy services integration
- A low-cost, fully digitally-enabled insurance platform (IT and operations)
Learn more about Accenture’s Digital Agriculture Service, the Accenture Precision Agriculture Service and the Accenture Connected Crop Solution.