AgriTech/Insurance Intersections

October 18, 2021

AgriTech/Insurance intersections: The contribution of insurance and technology as a source of sustainable finance in agriculture and breeding livestock.

Agriculture and insurance have common ground and are challenging industries in terms of the risks they are associated with and how they are affected.

If we look closely at the field of agriculture and breeding; We see a range of global trends impacting food security and the sustainability of their systems. The world population is expected to reach approximately 10 billion by 2050 and agricultural demand is expected to increase by 50%. Currently, around 800 million people are chronically hungry and 2 billion are micronutrient deficient. It is predicted that income increase in low- and middle-income countries will also lead to higher demand as their consumption will transition from mostly grains to meat, fruit, and vegetables. As production is expected to increase at the same rate, the pressure on natural resources increases. On top of all this, food losses and waste cause a significant portion of agricultural procurement to be wasted.

Climate change is affecting the whole world, endangering crop and livestock processes, along with fish stocks and fisheries. Trying to meet the growing demands for agriculture with existing farming practices seems to lead to increased greenhouse gas emissions, further deforestation, and land degradation. The use of chemicals such as synthetic fertilizers and pesticides for agriculture greatly reduces soil fertility. As a result, agricultural activities produce a lot of waste and by-products, which leads to increasing our carbon footprint. When we consider organic agriculture, which is believed to have a positive effect on both the ecosystem and the product, we see the fact that it contributes negatively since it requires more land compared to traditional farming methods.

The degradation of natural resources, the loss of biodiversity, the de-localization of damages, and the spread of plant and animal diseases, some of which have become resistant to antimicrobials, are creating an obstacle for the efforts that take on these challenges. Although productivity increases with technology, the income, and welfare of the population engaged in agriculture and livestock breeding are decreasing due to shrinking profit margins.

In summary, we can list the critical problems facing agriculture as follows.

  • Approaching food crisis as a result of increasing population and demand
  • Increasing disasters as a result of climate change, impaired balance
  • Rapidly running out of natural resources, especially freshwater reserves in the world
  • Spread of resistant plant and animal diseases
  • Extinction of natural resources due to widespread industrial farming practices
  • High food waste
  • Disruptions in trade networks and fluctuations in global demand for agricultural products
  • Economic challenges and increased debt for individual farmers
  • Finally, the impact of the COVID-19 outbreak on production.

For all these reasons, agriculture and breeding are under high uncertainty and risk.

Factors such as decreased predictability and loss of locality make it difficult to insure agriculture. Insurers are reluctant to take risks on which they cannot provide a reasonable level of predictability. In other words, taking on these risks is a big risk for them as well.

However, in an environment of increasing risk, the financial sustainability of agriculture and breeding, and the masses working in these fields, need to be eliminated through insurance. Because, by definition, “insurance” means the transfer of risk from one business to another in return for a required premium, and the new undertaker of the risk becomes the insurer. Lack of insurance is the main cause of continuing poverty in agriculture, especially in underdeveloped or developing countries. While the insured producer can recover his entire production in a short time after a disaster, it is sometimes impossible for uninsured farmers to reach their pre-loss status, sometimes for decades.

We mentioned that the factors affecting insurability include predictability; including statistics and data depth so that the right premium can be calculated. Adverse selection, meaning the purchase of insurance only by the segment in need of insurance, and Insurance Abuse can also be listed as factors. In Agricultural Insurance practice, existing insurance coverage generally covers certain crop varieties and certain natural causes (eg drought, flood, pests, and wind).

At this exact point, let’s think about how it is necessary to include more insurance coverage for agriculture and breeding; how it would be possible to provide more -but also a more technically reasonable- risk transfer to the insurer, and how to increase the insurability of agriculture in a sense, to ensure that insurance coverage covers more risk... Don’t new technologies of the new age and the entrepreneurs and startups that can implement these technologies quickly and more agile with new business models come to mind?

I am aware that it is kind of a long introduction. However, this intro might be excused as we continue to disseminate the "pain points" that need to be focused on. Let's see how this situation creates opportunities for new technologies and entrepreneurs.

Agricultural technology or agritech is defined as the use of technology in agriculture, horticulture, and aquaculture to increase production, productivity and profitability. For example, the use of drones in agriculture, satellite cameras and sensors, IoT-based sensor networks, weather forecasting models, advanced automated irrigation systems, light and heat control, pest and disease prevention, use of advanced analytics on soil management, biotechnology, hydroponic farming practices, soil humidity sensors.

So, at which “solution points” can insurance and agricultural technologies meet?

Let's take a look at the prominent methods that focus on the solution points:

  • Data quality and depth: Detailed (granular) data is small data that can easily be integrated, shaped, and managed. Because detailed data can provide greater visibility into risk, it can also help provide more coverage to specific risks, tailored to the value of what will be insured. This may mean offering exemptions and premium rates that are appropriate for the development of the insured agricultural area or crop over the years. It may be possible that some advanced coverage, which was previously avoided by insurers, may become available under certain conditions. Technologies that can accurately extract and process this data from agricultural activities can create joint solutions with Insurtechs that can process big data and adapt it to insurance.
  • Creating an ecosystem: Ecosystems that can be created with the contributions of insurance companies, official or semi-official organizations, and start-ups can bring rapid benefits to all stakeholders, especially in a field with a wide impact area such as agriculture. With the accelerating and facilitating effect of technology, the benefit can be increased. In this way, insurers can go beyond today's core insurance coverage and share the burden with other stakeholders in creating more value. Leveraging richer models based on more data and new agrotechnology solutions can also lead them to offer more solutions as an advisory partner for farmers on how to better manage risk by. Involving governmental and semi-governmental agencies in this ecosystem can help ensure that the right coverage is applied for particularly challenging and pervasive risks.

  • Loss prevention and size reduction: As a result of examining the data with different depth models through machine learning and artificial intelligence technologies, providing continuous data flow with the use of drone and satellite technologies help intervene early detection of diseases, soil, air and water-related damages and even productivity decreases before the damage grows. Since this makes the risks of insurers much more controllable, it may be possible to provide both more extensive coverage and cheaper insurance.

  • Prevention: Today, ensuring the sustainability of both the insurance system and the warranty of the mentioned activities has helped shift the focus of insurers from compensation after risk to prevention before risk. In this context, it is not difficult to foresee that the data obtained with new technologies and the experience gained as a result of the analysis of this data will lead to brand new preventive systems. While this increases insurability, it can also reduce the burden of insurance premiums or exemptions on farmers and official institutions.

Now, let's talk about how to find common solution points with insurance through some examples of startups that offer agrotechnology solutions.

Aker Tech: Aker technology helps farmers to detect pests and pathogens in the earliest period and thus to take the most effective measures. Thus, the decrease in efficiency is prevented, costs are reduced and unnecessary drug use is avoided, contributing to environmental sustainability. Headquarters: Missouri, USA, Founded: 2016

Grower's Edge: Grower's Edge is a FinTech platform that helps growers increase profitability. It aims to improve the habits of farmers to use modern technologies through its proprietary data platform that uses datasets and forecasting methods. The company also provides market information, news, and weather data for the agricultural industry, while enabling insurance agents to submit policy offers with the SaaS platform it provides. In summary, Grower's Edge offers financial technology products, solutions, and tools that provide income assurance to farmers through data-driven methods. Headquarters: Iowa, USA, Founded: 2017

AQUAOSO: Aquaoso, a cloud-based SaaS revenue model, uses machine learning, data science, and geospatial processing to identify water-related risks, helping financial institutions reduce their overall risk burden in their lending operations. “A lender can use our platform to research and report water risk down to a single parcel of land for each new loan it considers. Our analytical model can be used to identify water risk mitigation strategies for existing loan portfolios.” Headquarters: California, USA, Founded: 2016 performs accurate risk and damage assessment by compiling and using agricultural climate and land data. Losses due to fraud and lack of actuarial data cost approximately 10% of the total insurance claims paid. Appraisal costs are also high due to frequent site visits and a complex data collection process. Also, agricultural companies and financiers cannot monitor what is happening in the field in real-time, which leads to a lack of information. allows creditors and insurers to use historical and real-time data to support their decisions. Tarsim, the first customer of, makes great profits every year in damage processes and information supply. Tarsim entrusted with the task of detecting a major field fire damage to test the technology. determined the condition of the crop and the damage with satellite images dating back only 1 day before the fire and ensured the correct determination of the damage. Headquarters: Tallinn, Estonia (Founders: Turkey), Established: 2018

GramCover: Insurance broker GramCover provides affordable, customized, and versatile insurance products designed for India's agricultural areas. In recent years, India has suffered significant crop loss due to floods and heavy rains. Crop loss and consequent financial loss is the leading cause of farmer suicides in India. And as the world moves rapidly towards climate change, crop losses will inevitably continue to worsen. Insurers such as GramCover, Bajaj Allianz General Insurance, Royal Sundaram, LIC, ICICI Lombard, GIC Re, HDFC ERGO, Aviva Ventures, and others sell the product, animal, health, motor, and life, etc. insurance products.

What made GramCover acceptable in rural areas was the initiative's good understanding of biological production processes; how geography affects production, and how to cover these risks after making their assessments. GramCover uses remote sensing, UAV, etc. technologies for these purposes. While many insurers have largely adopted one prescription-for-all approach, GramCover is customizing their insurance policies, making them more affordable for farmers.

“Challenges in crop insurance mainly arise due to the nature of risk, information inconsistencies in underwriting, the geographically wide distribution of agricultural production, and the complexity of biological production processes. “Even though farmers' incomes are quite small, we can create value in their insurance processes by removing the risk of them not getting enough insurance coverage. By making use of technology, we enable rural customers to find products they can easily buy at affordable prices,” says Jatin, founder of GramCover.

As seen from these examples, Insurers,

  • Can provide coverage or premium advantage to the insured which they normally wouldn’t to a farmer using a technology such as AkerTech, which facilitates the fight by detecting pests and pathogens at an early stage 
  • Can determine water risks almost on a parcel basis, not on a regional basis, and provide more guarantees by making a specific assessment for each risk with an initiative similar to Aquaoso.
  • Can create an ecosystem by establishing connections with farmers such as providing financial solutions, providing information and data, while having the opportunity to reach customers they have more information about and have the opportunity to bid and sell policies with platforms such as Grower's Edge.
  • Can detect damage with data depth, while determining the condition of the product the day before the event and the actual damage.

Finally, let's finish with a look at how a 2018 Accenture article evaluated the potential role of Insurers in ecosystems:

“Within this ecosystem, there is an opportunity for insurers to insure crop, fixtures, machinery, infrastructure, supply chain (warehousing, transportation, import, and export), liability and business results. As part of an ecosystem of digitized agricultural players, insurers can offer services including:

·        A marketplace for insurance

·        Farming risk scores

·        Auto agricultural insurance

·        Seed financing for farmers

·        Hassle-free damage management and damage removal services

The core competencies that insurers need to develop to provide these services are:

·        IoT data-driven, risk assessment, and auto insurance

·        Affiliate management and easy service integration

·        A low-cost, fully digitally-enabled insurance platform (IT and operations)


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