How is real social equity achieved through agricultural insurance? How is actual revenue insured? How is inclusive insurance directly delivered to farmers? Together, Simon Schwall, Founder and CEO of OKO, Dr. Helen Greatrex of the International Research Institute for Climate and Society at Columbia University, and Victor Wang, Actuarial and Analytics Lead at Pula Advisors - all expertly moderated by independent consultant Alice Merry – brought the discussion surrounding these big questions to life, during MiN’s inaugural Expert Forum in 2019.
Given the risks faced by farmers - including climate change and volatile global markets - new ways of developing, accessing and distributing inclusive insurance products are essential. Simon Schwall explained how OKO brings crop insurance to individual farmers by acting as a broker sitting between mobile network operators and insurance companies.
Traditionally, he said, microinsurance products have been offered through aggregators such as cooperatives or microfinance institutions (MFIs). OKO, however, goes straight to farmers in Mali via their mobile phones. Farmers can now register, pay premiums and have claims paid through their mobiles - but only after careful product design and market testing using field agents to to explain the benefits of insurance in person; setting up a call centre to offer advice and answer questions remotely; and allowing more tech-savvy and literate farmers to self-register on their smartphones.
A year into the start-up, OKO have 1420 registered customers and 394 paying customers. Challenges, said Schwall, include reducing costs - possibly by replacing field agents with telemarketing, or moving away from area yield-based insurance to weather-based index insurance. OKO have learned that they need to simplify the payments journey, to make it easier for farmers who are less savvy with mobile money or who can’t read text messages.
Next up was Dr. Helen Greatrex, who reiterated her belief that access to inclusive insurance is essential to realise the Sustainable Development Goals (SDGs) and that the world’s poor will not achieve lasting prosperity without it. However, she warned, there is increasing evidence that financial inclusion, social inclusion and gender equality will only happen if insurance companies get serious - simply providing microinsurance products will not automatically lead to social and financial equity.
Some programmes - such as the Oxfam/World Food Programme R4 Rural Resilience Initiative and the Index Based Livestock Insurance (IBLI) - show good insurance uptake by both men and women, but both are supported by big organisations who can pour resources into the challenge. Other evidence suggests that insurance is less likely to be purchased by women or other vulnerable groups, though it is unclear if this is down risk aversion, access or cultural pressures.
Greatrex explained that companies who are serious about making a social impact need to take four factors into account: access (how can customers access products taking into account gender, wealth, resources and risk?); procedures (how can customers participate in the design, marketing or implementation of products?); representation (how can customers have their knowledge and values taken into account?); and distribution (who actually benefits from insurance?). It’s a difficult challenge and sometimes it feels overwhelming, she said, but toolkits and frameworks developed over recent years can help companies map out the social equity or poverty impact of their particular insurance products.
Victor Wang presented an innovative Revenue Index Insurance product which combines yield insurance and price insurance to guarantee a farmer’s income. A changing environment demands different products - current index insurance is typically weather-based or yield-based. We need innovation to match the climate change risk and market volatility that both farmers and insurers now face. Revenue index insurance protects farmers against shocks in prices in volatile years - for example when a bumper crop causes prices to fall. It’s not about how much crop volume farmers produce, but actual income. It covers drops in both yields and prices.
The outcome, he explained, guarantees the revenue which is the backbone of many agricultural markets today. By providing cover which decreases revenue volatility, farmers can plan future investments in land and equipment, allowing them to increase productivity and thus move further from poverty. However, there are challenges, especially around data - you need not only detailed historical yield information but data on global, regional and local market performance, and good local knowledge of markets.
Wrapping up, Alice Merry asked each presenter to predict developments in the next ten years. Helen Greatrex believed we will see increased standardisation, because we are learning more and starting to address issues systematically. There will be more and more tools and knowledge about what is and isn’t working, which will lead to more holistic, integrated products. Victor Wang predicted a rapid expansion of inclusive agricultural insurance. As farmers get access to credit it will have a “compound interest effect” - farmers will be able to invest in bigger plots, become more commercial and will eventually move out needing microinsurance. For Simon Schwall, as data becomes increasingly available and precise - for example through better satellite and smartphone image analysis - more sophisticated products will cover all types of risk, becoming more accurate, easier to create and use, and more beneficial for farmers.
The entire discussion is available for download here in the members’ area. Look out for details of our next Expert Forum! If you’re not yet a member of the MiN, find out more about a membership with the Network to gain exclusive access to our Expert Forums.