Podcast | Data & Analytics in Agribusiness

June 18, 2019

On the go and don’t have time to read? In our new podcast, host Greg Guse visits with MMA Risk Management Consultant Travis Starks and Analytic Services Vice President Sarah Delaney about data and analytics in agribusiness risk management.

Listen and subscribe to the podcast at Apple Podcasts or Stitcher. Below is a transcript of the episode, edited for readability.

Greg Guse:                         
Is using data and analytics in agribusiness risk management a relatively new concept, and why is it important?

Sarah Delaney:                 
I think in the insurance industry, data has been an obvious part of the process. Buying and selling insurance has been a more transactional process historically, and we're really looking to change that. I would say it's probably been an evolution in the last five to 10 years of how employers and businesses are using data in all aspects of their business.

We're really trying, to understand our clients and what decisions they're making, and understand all of their business, because there might be a lot of pieces that come into it that aren't necessarily insurance-driven, but that are helping to put the entire framework of running their business and moving forward.

Travis Starks:                     
We've been really good in the risk management world of predicting the past. What we're looking to do though is to put together a program that can help look at trends and say this is what the next three years are gonna look like for you. This is what the marketplace is gonna look like. And really putting science behind it. Again, we've done “cowboy analytics” for a long time, but we truly need to put thought, perspective, and action behind these things.

Greg Guse:                        
How is this data and information collected?

Sarah Delaney:                 
It's various sources that we're utilizing, straight from the insurance policies in a lot of cases. Claim data, that's probably the standard insurance process that we're going through. 

And we're using public data sets, whether it's weather data, or ag prices, we're taking data that's available in a lot of different public formats and aggregating it together.

From a benchmark perspective, we have access to a significant level of data that we're able to actually help beekeepers, if that's the case, benchmark what their business looks like, and what other beekeepers are purchasing in their insurance aspects, and how they're making decisions.

So it's not just looking at the guy down the street, it's aggregating data in a significantly different way.

Greg Guse:                                        
Once this data and information is gathered, how is it analyzed?

Sarah Delaney:                 
We’ve been really good historically about being able to do back of the napkin math, or trying to draw a picture, but it's so much easier to see something in a visual format than it is to actually see it just written down.

So looking at your workers' compensation claims, if that's what you're looking at. If you're looking at what the price of something is actually over time, being able to visualize some of those pieces.

Travis Starks:                     
I think one of the things that Sarah's hitting on that is of the utmost importance is that this information needs to be valuable. And in some cases, it needs to be easy to understand, because you are going to be presenting this information CEO, CFO, COOs, but then you're also going to be pushing it out to board members.  

I'll give you a perfect example. We have clients that have hundreds of locations around the country, so if we can take that information, show what the value of just the property that they have scattered across their footprint, and then put a heat map up against that showing where maybe they have claims issues, or where their property values are, or where financially what locations are making money, which locations are costing them money.

This is something that Sarah and her team can put together using software that we can heat map it out for the whole business. They can share this with hundreds of employees to help understand why they're making decisions, maybe why they're shifting employees from one location to another, another region, or maybe why they might be downsizing, putting information in the hands of boards of directors to make sure that they're making solid decisions with the information that we have.

Greg Guse:                        
Once the data and analytics are collected and analyzed, how are you able to help your agribusiness clients make sense of it or have useful information to work with?

Travis Starks:                     
A lot of our clients are different in what they want to utilize this for. We have some of our clients that are looking to make business decisions if they want to close locations, if they want to expand locations. Some of these others are where they want to focus expansion as it relates to employees, or maybe where they might have to tighten up financials or build efficiencies in organizations.

So again, we'll use Sarah and her team to put that information in a visual format that they can present. We'll have clients that want to present it to their board of directors, it may be 12 people, or maybe 400 employees, or you might be looking at people that want to present this idea to city councilors, organizations that want to help businesses grow in their community.

Greg Guse:                        
I trust you would agree that agriculture is a very unique and specialized industry with many different segments within. Likewise, there are numerous unique risks facing both producers or the agribusinesses that serve them. Do you have any examples of how data and analytics help you address the unique risks prevalent in agriculture?

Travis Starks:                     
One of the things that we've been able to do is overlay claims over on top all of [a business’] locations. So then you start looking at what places are having a good safety culture, maybe some that are struggling a little bit.

When you start looking at promotion within the workplace, you might have a location over on the east side of the state that has done very well with culture. So how do we expand that culture from that location to maybe one of the other locations that’s struggling a little bit? Where you might have a location that hasn't had a great track record, but they've got somebody next in line that should take over leadership, you start looking at the information and say, "Hey, I got an idea. Why don't we take a guy from over here that's grown up the last five years in this culture, and see if we can get that take place over here?"

We give our clients the information to say here's a reason why you might want to look at doing this. We're not telling you what to do, but we're just telling you this is what the information's showing us, so it helps them in their day-to-day decision making.

Sarah Delaney:                                 
A lot of times our clients are just using the HR person for their work comp, and their employee benefits, and then they might have a safety director that's running the other pieces, but helping them speak together and utilize some of that data to drive some of their conversations, and really understand the risk they have, has probably been one of the most important things that we're trying to push forward with.

Greg Guse:                        
Why would an agribusiness or an ag production operation rely on MMA for risk management?

Travis Starks:                     
Agribusiness is near and dear to our heart, and we've really put a lot of time and effort into understanding what our clients do. And that's one of the biggest differences between what we do and what other folks do.

You will have people that come into work on risk management that maybe understand insurance, they understand safety, culture, but they don't understand the agribusiness space. Going in there and understanding a multi-faceted organization where it's full service, speak to a cooperative for example. They might have eight different businesses in one, and to understand how that operates, it's a very unique animal.

Sarah and her team have done a great job of building and bringing in models that we can utilize. Total cost of risk is another one of those that we can sit down with a client and talk to them about what it costs them, their overall risk for that year. So whether you made more money then you were expecting, you lost some money, you're in the middle of an acquisition so it's really hard for financials to catch up, so you as a decision maker in that organization, how do you know if you were successful that year in your overall risk?

You really don't, it's a toss-up. So giving Sarah all that information, having her team crunch the numbers to say, "We're gonna give you a score as it relates to your overall revenue. We're gonna tell you what you are spending per $1,000 of revenue, and that's gonna give you a pretty good idea if you were successful or not." 'Cause the best thing that we can do is tell you you're going in the right direction, or you're going in the wrong direction, let's see what we can do to fix it.

We have prospects mainly, come and we ask them how their program is working, and they said they're happy. And we'll ask them more probing questions, and most of the time people will say, "You know, we haven't had really any claims." So then you ask them, "Why do you think that is?" A lot of times people say, "Well, I just think we're lucky." And I say, "Okay, so you tell me how you replicate luck. You tell me okay, you've been lucky in Location A, tell me how we can be lucky in Location B, and we can be lucky year after year after year.”

That is a flawed way of looking at it. I realize maybe you just want me to get out of your office and we don't wanna talk about this anymore, but this is a serious topic. So luck isn't a way to operate.

So we crunch the numbers and say, "This is why you guys have done well here. But overall, maybe you've struggled in certain areas, so let's talk about how we can make you better there." So it really starts that dialogue, being able to bring in a different perspective, because not a lot of companies are doing this.

Greg Guse:                        
It certainly appears that MMA is providing more than insurance coverage to manage risk, but rather an overall business consulting service. Would you agree with that?

Travis Starks:                     
Absolutely I would. In reality, we can really only cover about 60% of your true risk with insurance policies. So then what we have to do there is we have to look at whether we can do it through contracts, or we can do it through safety programs. And help mitigate those risks that are out there that you traditionally can't cover through insurance policies.

Greg Guse:                        
Is there any one single benefit that ag producers or agribusiness managers can realize from the service you provide?

Sarah Delaney:                                 
I really think transparency is probably the biggest thing. It's essentially a mirror that our clients think they know, and just like Travis said, they're gathering all of this information, and they've had it at their fingertips, but it's kind of this analysis paralysis conversation where you have all of it, but now what do I actually do with it?

We’re trying to help bring the most important pieces forward. Travis mentioned a little while ago that our goal is really to help them understand it. So we don't want to provide data just to provide data, it is providing that transparent data to say here's the five bullet points that you really need to glean from this, and how do we actually put something in place to move forward.

Travis Starks:                     
Facts. We meet with the CEOs and the CFOs, and so they deal in facts a lot. But you can get overrun with emotion in a lot of different businesses, especially in agriculture, because you have boards made up of people in the industry. You have member owners, of cooperatives more specifically, and it's an emotional business.  

So the best thing we can do is come in and say this is who you are with numbers. This is who you are with the information that you've given us. These are the facts. So it gives that person in leadership, that information that he can present to his board, to his member owners, to his employees saying this is who we are. I understand we might feel differently at times, but this is what we are, this is who we are. And to give them something so clear-cut, so precise, is refreshing to those guys, because again you deal with emotion all the time.

Greg Guse:                        
Can you cite specific examples of data that you get from your clients and how you use it?

Travis Starks:                     
One of the areas that we've jumped in and seen the most dramatic change is reviewing a breakdown in payroll. So what we're able to do is value their payroll in certain categories in certain locations. So again, what this information is telling us is how they rate against kind of the national average, and then what we can is we can look at do they have more efficiency than maybe one of their peers, so they would have less payroll in a more labor intensive classification.

Making sure that we look at that information, we can speak back to our clients and say all right, so we're seeing you are above or below this particular number, can you tell us why? And if they can, obviously then they know maybe where they're deficient. Or if it's news to them, then we can talk about maybe we're classifying employees incorrectly, where you have more office or administrative staff because automation has become huge in agriculture. So we don't necessarily move grain the way that we did 20 years ago.

Greg Guse:                                        
And is there a measurable cost savings for that?

Travis Starks:                     
Absolutely. As you could imagine, if you have a laborer out, if they're moving bushels of corn from one location to the other via a straight truck and an auger, compared to somebody who's sitting in an office like this one hitting a button, you would imagine that that person sitting in the office pushing a button, the likelihood of them getting injured is significantly less.

You can see the overall cost in your risk management program as it relates to that employee, you can see that immediately. Now we go back on the other side, you start talking about the property. You start talking about different lines and in an insurance policy. You tell the insurance company we've removed all of these hazards, and now we've built in this automation. This automation is allowing us to move twice as many bushels half the time half the cost, and the safety is you have very little human interaction. So that leads to the overall safety of the organization as well, and those sites.

Greg Guse:                        
How about the confidentiality of this data and information that you gather?

Sarah Delaney:                                 
I can't begin to tell you the security we have with regard to how we receive data, how we store data. A lot of it isn't actually saved on anything local, it's all saved on all of our secure servers. We have some pretty significant data access requirements.

I can tell you that we are one of the most secure in the marketplace.

The beauty of being this national and international organization, is data security is something we don't take lightly. It is a very serious issue, and one that we make sure that we're not sharing company B's information with company A, nor do we have it exposed from a cyber perspective.

Greg Guse:                        
Very good. Well thank you to Travis Starks and Sarah Delaney for their valuable information and input provided on the topic of data and analytics in agribusiness risk management.