Brokers could turn to agriculture for growth
South Africa’s agriculture sector could prove to be a lucrative hunting ground for local risk managers, non-life insurance brokers and insurance technology partners. Farming is beset by challenges; but also presents countless opportunities as a shrinking band of commercial farming units leverage innovation and technology to contribute more and more to South Africa’s GDP and food security. Agriculture tipped the scales at almost 3% of the country’s 2020 GDP, growing to 18% when downstream industries linked to agriculture are factored in. Overall, the sector employs around 885000 people and contributes approximately 10% to our all-important export basket.
The Constitution is sacred
The agriculture sector was featured during the latest instalment of Insure Talk 2021, held virtually. The 3-hour long webinar kicked off with a comprehensive overview of the domestic farming landscape, courtesy Christo van der Rheede, an executive director at Agri SA. Van der Rheede refused to shy away from sensitive political issues, warning that “playing games with the SA Constitution” was a serious mistake. “The only resource that farmers have is the land that they own,” he said. “Yes, we must have land reform … but you can only address the legacy of the past if you expand land ownership to all people. You must ensure that every person that [resides on] a property, those who live on church land or communal land or state land, get title deed over that land”.
The topic of land restitution resurfaced during a subsequent talk on the role of insurance in food security, given by Hanlie Kroese, a business development manager at Santam. Kroese noted that the SA government had redistributed five million hectares totalling 5500 farms to more than 300000 beneficiaries to date. This was in addition to the 2.7 million hectares transferred, and various settlements made, to the more than two million land claimants as part of the original land restitution process. Government seems to have widespread support from the private sector in achieving its longer-term land ownership and redress objectives. “Santam is pursuing programmes to assist smallholder and emerging farmers with market access, to develop skills across the entire agricultural value chain and to increase the number of commercial black farmers,” she said.
Insurance is the DNA of the economy
Given the prominence of agriculture in the country’s economy, the question becomes: What role can insurers, insurance brokers and risk managers play in facilitating and promoting growth in the sector. “Insurance makes the world go round,” noted Kroese. “The industry promotes financial stability and economic growth and contributes to the social protection of citizens by enhancing their financial security … and there is a direct link between insurance development and economic growth”.
Stakeholders involved in Agri-insurance cannot ignore the overarching consumer and technology trends that are changing the way the we conduct business. Food producers find themselves under increasing pressure to meet changing consumer demands for healthy food and online shopping while accommodating consumers’ desire for clean and sustainable farming practices. Technology is driving innovation in the sector and it is difficult to find any aspect of modern day commercial farming that has not been impacted. Each innovation is aimed at one or other positive consumer- or Agri-centric outcome.
An article by Trimble, published in January 2021 lists some of the innovations that are currently rewriting both commercial and subsistence farming practices. Aerial imaging, which tops the list, is a process using drones or other overhead imaging technologies, combined with precisions application technology, to allow farmers to better manage their fields. Another popular innovation is the Internet of Things (IoT) deployment of in-field sensors that continuously report rainfall, temperatures, wind and even soil conditions to a central database over what is commonly referred to as a narrow network. Data collected in this way can then be assessed by farmers and provide real-time feedback for a range of corrective or preventative actions.
New technology, new platforms, more insurance business
Data integration is a key supporting technology that allows farmers to collate the various data streams produced from the farm and create a real-time overview of everything that is happening in the fields. A few mouse clicks are all that is needed to complete field mappings, to determine what and where to plant and spray, or to give an estimate of harvest yield. “Our challenge is how to link our insurance solutions to the new risk management technologies, whether it is bio-identification or the many tracking and traceability devices … we must determine how insurance can best support farmers and consider what new platforms or new business opportunities might arise,” said Kroese.
Whether Agri-insurers develop solutions for emerging areas like parametric insurance, greenhouse insurance or aquaculture insurance or stay committed to their current product line-ups, they will have to focus on preventing and predicting risk rather than simply reimbursing costs or replacing assets after a loss event. Why should insurers and insurance brokers care about agriculture? We thought it fitting to use Van der Rheede’s final presentation slide to close: “Continuously empowering our farmers and protecting and advancing their interests is critical to ensure future food security for all South Africans … it is not land that produces the food, it is expertise”. Insurers and insurance brokers can bring unique risk management and risk mitigation expertise to the table to assist farmers in achieving food security.
Writer’s thoughts:
Nobody can dispute that the agriculture sector is important to South Africa’s long-term economic prospects; but it is less clear whether the Agri-insurance world is every broker’s cup of tea. Two questions for our loyal readers. First, do you think an urban-based broker can have success in servicing farming communities and writing Agri-insurance policies? And second, have you ever thought of adding Agri-insurance to your current mix of risk business? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].
