The Future of Risk and Insurance in Agriculture — wrapping up a three-episode podcast series
Here at Tenacious Ventures we’ve recently had a number of conversations with startups on the cutting edge of innovation in agricultural insurance. Insurance has been a notoriously low-innovation industry, but powerful forces like climate change and cheap, ubiquitous technologies are starting to shake up business-as-usual for both incumbents and customers. It’s also a space that we soon learned was not well understood, even by folks who interact with its products and people on a regular basis.
To better understand the possible directions that ag insurance might head in the future, we launched a three-episode deep dive on AgTech…So What?:
- a 101-style conversation for anyone new to the space
- an interview about bringing a new insurance product to market
- a final “So What?” episode working through our thesis on the future.
Our first episode featured Matt Coutts, Chief Investment Officer of Coutts Agro and all-round agribusiness expert, alongside Matthew Pryor, General Partner at Tenacious Ventures. Together, the Matthews laid out the basics of how ag insurance works today.
We learned that traditional indemnity insurance in ag requires a lot of detailed information, much of which can only be physically collected by employees on the ground. This is expensive and ripe for disruption by technology.
There were two key market dynamics also shared about the industry: one, that insurers make money when weather destruction does not occur; and two, that ag insurance as it stands is a zero-sum game played out between farmers and insurers.
Notably from this episode was the observation that exposure to more extreme weather in the future is a huge risk to insurance companies. It’s because of this that, in a world increasingly affected by climate change, we can expect to see traditional policies becoming much more expensive as the risk is properly priced in.
Episode 2: The Future of Insurance in Agriculture, with Damon Johnson, Global Ag Risk Solutions
With the fundamentals understood (kind of), we heard from a new company innovating in ag insurance. Damon Johnson is Director of Strategic Projects at Global Ag Risk Solutions, and is currently working on bringing a parametric insurance product to canola growers in Western Canada.
What is parametric insurance?
As opposed to traditional indemnity insurance, which in the event of a claim requires a physical assessment of damage that occurred to a farmer’s insured crop, parametric insurance is a binary proposition. Did a weather event happen, or not? This simplifies the triggering of payouts, and is a seismic shift for farmers used to waiting months for claims and assessments to instead access reimbursements with the click of a button.
Using high-resolution satellite data and cheap, locally-sensed weather data, parametric insurance is an appealing alternative for farmers that could introduce cheaper and more tailored insurance policies based on their exposure to weather, or other factors, during the growing season.
We see parametric insurance as a great example of reimagining how an aspect of agriculture (i.e. insurance) could work in a digitally-native future. We’re confident that the future looks like farmers becoming more savvy with these digitally-native products, and expecting their insurance to be packaged, bundled, or embedded a lot differently to what it has in the past.
Episode 3: Ag Insurance…So What?
Our series ended with a conversation between Sarah Nolet and Matthew Pryor, Co-Founders and Partners at Tenacious Ventures. They attempted to bring together the insights gathered so far into a coherent thesis on the future of the industry.
Matthew and Sarah covered why CAC and LTV are high in traditional ag insurance and how these numbers will be affected by digital products. They also discussed what the impact of insuring farmers against the weather itself, rather than damage it causes, would be for the industry.
Given how much easier it is to know the weather, and that claims based on whether particular weather occurred or not are so much cheaper to assess, companies would be freed from the costs of traditional, analog processes. The teams working to reimagine what future insurance products could look like are exactly the kind of investment opportunities Tenacious Ventures is seeking.
Wrapping Up
This brief exploration of ag insurance could have gone on for many more episodes and conversations. As we continue to learn about and (hopefully) invest in the future of ag insurance, we’ll be sharing more insights through our blog and podcast. Subscribe to our newsletter to stay in touch.
