Contain Inc, the alternate finance business for indoor agriculture, has launched an insurance service for indoor farmers in collaboration with insurance broker InterWest Insurance and a leading national insurance company. The service aims to fill a gap left by current insurance providers and products as the indoor agriculture industry growers, according to Nicola Kerslake, founder of Contain and the Indoor Ag-Con, which is taking place this week in Las Vegas.
“When indoor growers go to an insurance broker, they either don’t know what category they should be in, or the insurer is unable to meet their needs,” says Kerslake. “Typical insurance for property is not going to include crop loss; when liability insurance was created for warehousing, no-one thought people would be growing crops inside them!”
Indoor growers also have different insurance needs to their outdoor counterparts for various reasons including their reliance on various climate control equipment.
“Growers have sometimes found that they’re not covered for key risks, such as losing a crop to an HVAC unit’s breakdown” commented Rick Harrison, vice president at InterWest Insurance.
Indoor agriculture is a small but rapidly growing part of the US food industry. According to research conducted by Kerslake last year, there were 15 commercial-scale vertical farms and rooftop greenhouses in the US in spring 2015. By spring 2017, there were 56, and Kerslake guesstimates that there are now hundreds.
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Over the past six months, Kerslake and her colleagues have been working with InterWest Insurance and the insurer, both of which have a good understanding of agriculture, to create an insurance product that she describes as “an equivalent to comprehensive car insurance but for container farms.” The group decided to start with container farms as they present a finite unit with pretty much the same parts regardless of the supplier, which means the insurers can offer a flat rate.
This insurance service is the second to come out of Contain Inc, which launched a lease financing product last year.
This service enables vendors of various indoor agriculture equipment to come to Contain when a client needs financing to purchase their wares. With the information from a two-page application form, Contain figures out who the most appropriate lender is and can generally get a response on rates within 24 hours, according to Kerslake. Contain is working with 15 vendors on these three to five-year leases.
Contain charges an arrangement fee for this service.
Kerslake describes her clients in three ways. The first are current outdoor or greenhouse farmers looking to add capacity; they typically have long-term businesses and strong asset bases and can get the best rates. The second set also have existing businesses but not in agriculture. “It’s an increasing trend to bring other skill sets into indoor ag, and we’ve seen everything from non-profits to manufacturers in other products coming to the industry,” she says. The third group are completely new to the industry and are usually younger, startup entrepreneurs. These present tougher situations to work with.
“There is a perception that this group makes up the bulk of indoor growers but, in fact, the vast majority of operators in the industry fall into the first two brackets,” says Kerslake. “There is a lot more diversity than the media portrays.”
Contain’s clients are mostly located in the US and Canada, across cities, peri-urban and semi-industrial areas.