Andries Wiese – Head of Agri – Hollard Insure
The 58th NAMPO Harvest Day agricultural exhibition will be held at Bothaville, Free State, from May 12 to 15, with the theme Resilience through Innovation.
Hosted by Grain SA, NAMPO has become one of the country’s biggest agricultural events and provides a platform for industry stakeholders to engage on the future of farming, while showcasing the latest developments in agriculture. The exhibition is expected to once again demonstrate how many agribusinesses have expanded beyond production into storage, distribution, wholesale arrangements and even retailing.
Returning to NAMPO as an exhibitor for the ninth time this year, Hollard will highlight the need to rethink the assessment and coverage of agricultural risks within the context of this continued expansion of agribusinesses, alongside the emergence of new risks introduced by artificial intelligence (AI) and other innovation.
Speaking ahead of the exhibition, Andries Wiese, Head: Agriculture at Hollard, says the evolution of agribusiness and the pace of technological advancement in agriculture has fundamentally changed the risk landscape. He believes insurers, brokers and agribusiness clients will increasingly need to keep the bigger picture in mind and “connect-the-dots” across the entire value chain when assessing and mitigating risk.
Modern commercial farming, he explains, has expanded beyond production, while becoming increasingly precise, data-driven, and technologically advanced. Innovation across the value chain has undoubtedly improved efficiency and productivity, but it has also introduced entirely new, and often multi-layered, categories of risk. Insurers active within the sector need to evolve if they are to provide coverage across this broadening risk spectrum.
“As an agricultural insurer, it’s our responsibility to share information, assist and advise our brokers and clients regarding changing risks as the sector evolves. To do that, we need to ensure a deep understanding of the newest developments within the industry, including new business models, innovative machinery, emerging technologies and alternative risk management tools. If clients are going to be buying new technology, or starting a new retail business, we must work with them and our brokers in ensuring that all risks are mitigated and/or covered.”
The theme of this year’s NAMPO exhibition is particularly relevant to the role of insurance in agriculture, says Wiese.
“Resilience is precisely the outcome that insurance strives to deliver – the ability to continue operating across an increasing number of related businesses despite unexpected disasters. Innovation in agriculture insurance is as important as innovation in agriculture itself. As insurers, we must ensure that agribusinesses can withstand technical, financial and any other kind of setback, and remain productive and sustainable. And we cannot just talk about cover – we need to be talking about holistic risk management in the context of the risk appetite and capacity of each agribusiness.”
The impact of innovation
Reflecting on developments over the past nine years, Wiese notes that traditional agricultural insurance products were often structured as bundled, “off-the-shelf” policies designed to cover a broad range of risks.
However, increasingly individualised agribusiness models, along with the integration of advanced technologies such as drones, AI and precision farming systems, has significantly transformed agriculture and with it, the nature of risk. Sometimes, that risk falls outside of the ambit of available insurance cover.
“The introduction of new technology can render existing cover redundant, or create new risks, while the growth of agribusiness beyond farming demands a much more holistic approach to risk management. This combination of new and evolving risks has forced us to relook our insurance offerings.
In effect, while we need to deconstruct our policies and re-assemble them on a tailored basis to meet changing cover requirements, we also have to acknowledge that insurance is just one leg of a comprehensive risk management strategy for a complex business. Working closely with insurers and clients, brokers need to develop an overall perspective of each agribusiness and determine the balance between risk mitigation and insurance cover, based on business-specific levels of risk appetite and capacity. It’s all about seeing the bigger picture.”
“At a very basic level, you can look at the example of expensive flasks used in artificial insemination in the dairy industry. While technology has changed the way these flasks are used, most policies still provide cover based on old processes, rendering cover ineffective at best and completely useless at worst.”
“In pivot irrigation systems, as another example, rubber tyres are critical components. While tyre wear and damage is typically excluded in standard motor policies, in this context a machine that is out of commission due to a tyre problem can be disastrous, so the risk has to be assessed and properly mitigated.”
The risks associated with using the latest technology are also multiple and new, adds Wiese.
“Drones provide a good example. Now in widespread use, as airborne devices they introduce aviation-related risks, which were not previously considered in agricultural policies.”
Looking beyond production, risks linked to automation and artificial intelligence may impact further down the value chain. If AI systems used to plan and control a logistics operation or an automated bottling plant go wrong, for example, it could be disastrous. A failure of navigation systems resulting in the loss of products intended for export could effectively wipe out the profits from an entire harvest.
Building solutions beyond conventional insurance
The bottom line is that new business models and technology-related shifts, alongside changes in existing risks such as climate change and safety and security, are reshaping the insurance environment. Addressing this constantly changing risk landscape requires a holistic approach to ensure comprehensive risk mitigation and cover.
“What is needed goes beyond conventional insurance cover offered in the traditional way. We need to build solutions that address the full financial implications of these new and evolving risks and tailor these to individual risk appetites.”
This approach extends beyond standard policies to include less well-known instruments where necessary.
“The use of alternative insurance instruments to cover risks that conventional policies do not cover has emerged from a more comprehensive understanding of the agribusiness value chain. This may include products that are financial or even medical in nature, and their incorporation into broader risk solutions.”
The evolving agribusiness landscape demands that insurance evolves alongside it. Innovation, in this context, is not limited to covering new technologies, but extends to increasingly complex business models. This requires an end-to-end, holistic understanding and management of risk portfolios to ensure that agribusinesses are equipped to remain resilient in the face of the myriad challenges that confront them.
