Farmers Edge insurtech raises CAD $125m in Canadian IPO
The AI-driven agri-risk management insurance platform is a global industry-leading company. The Winnipeg-based insurtech delivers real-time risk management solutions for farmers, retailers, and other agricultural stakeholders.
Founded in 2005, the company has enabled farmers to increase their yields, maximise their revenues, reduce their costs of production, and implement data-driven practices for sustainability through its disruptive strategies and solutions.
In December 2020, Farmer’s Edge reported that more than 3,000 growers have used their services and they have covered more than 23 million acres of land in six countries. Estimation shows total revenue in 2020 was approximately CAD $46m, up from $14.4m in 2017.
Reports suggest that according to sale documents produced on February 09, Farmers Edge initially attempted to sell a 16% stake with shares priced from between $10 to $17.
A total of five investment banks took part in the IPO and were led by the National Bank of Canada and Canadian Imperial Bank of Commerce. Both banks have the option to acquire an extra 15% of the offering.
So far, Farmer's Edge is yet to make an official comment to the press on the IPO. The company will start trading on the Toronto Stock Exchange under the symbol FDGE.
Farmer's Edge is the pioneer of a management platform called FarmCommand, which harnesses a combination of technologies that use real-time field-level data, remote sensing, AI-driven models, and secure automation technology to help growers increase their crop yields while sharing relevant crop loss data with insurers.
Crisis-driven agricultural cover for farmers is growing increasingly popular in emerging markets too, with the Kenyan insurtech startup recently closing a Series A investment round of $6m to provide digital and agricultural insurance to African farmers.
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.