There’s a technology revolution happening right now in the microinsurance industry, protecting small-scale farmers against crop failure and livestock losses and building their resilience to crises. As part of the UN’s Sustainable Development Goals (SDGs), agricultural development plays a vital role in poverty reduction and economic growth. Yet globally, more than 500 million farmers have no access to insurance - making them increasingly vulnerable to climate change-related extreme weather events.
Delivering affordable agricultural insurance for smallholder farmers is challenging - average penetration rates are just 0.5%. But increasing use of blockchain and other technologies is showing promise of greater access. Automated parametric insurance (or index-based insurance), using Earth Observation satellite data to trigger payment, means farmers don’t even need to submit a claim and an insurer doesn’t need to send a claims adjuster.
An ambitious newcomer to the field is MiN member IBISA, a risk-sharing service which calls itself ‘an alternative to microinsurance, targeting small farmers worldwide.’ IBISA, which was incubated at Luxembourg’s BITValley, relies on blockchain and satellite data to reduce costs and reach smallholder farmers at scale. After launching in February 2018, two pilot projects will go live in India and in Niger early next year.
“We’re piloting in Niger with the aim of validating and testing the concept,” says Annette Houtekamer-Van Dam, Product Lead at IBISA. “We’re working with local enablers such as herder groups and mobile money operators (MMOs), as well as international partners who provide the satellite data.”
Key to the success of the 20-month pilot is Réseau Billital Maroobé (RBM), IBISA’s local partner in Niger which represents livestock farmers and breeders across the Sahel - the huge region of sub-Saharan Africa plagued by frequent droughts. RBM has detailed knowledge of pastoralists, current grazing cover and the best places for a farmer to graze their herd. It tracks cross-border movement of breeders and herders, and keeps them up-to-date on market prices. AGRHYMET, an organisation representing 13 countries across the Sahel which provides training and meteorological information, is also a significant partner.
“Drought is a major problem in Niger,” says Houtekamer-Van Dam. “Lack of rain means pastures become infertile and cannot sustain big herds. When the Earth Observation satellites detect and trigger the agreed drought point, money is released to the herders’ mobile phone wallets, and it is up to them how to spend it.”
“We will start the pilot with one MMO, but we may need to involve ultimately two or three MMOs, so that we can give herders a choice of network connectivity. RBM will facilitate talks with the MMOs in Niger and use their considerable influence among the thousands of herders who are potential users and clients,” she explains. “Initially, we will promote the product on the ground and analyse the local business environment to refine what we offer. The pilots will be specific to different regions, taking into account local language, literacy and habits. Based on that, we will design training materials, train up staff and run farmer field schools. RBM will act as field agents, backed up by campaigns on local radio and billboards.”
Sustainable development campaigners have been quick to spot how technology can drive the SDG agenda. Earlier this year in Sri Lanka, Oxfam partnered with Aon and Etherisc, a leading InsurTech company, to deliver microinsurance to thousands of smallholder paddy field farmers using blockchain technology. The project offers a completely automated, low-cost index insurance product with a higher percentage of premiums being used for immediate claims payment. Oxfam say applying the latest technology available allows them to deliver more tangible, lasting results.
Elsewhere, US-based WorldCover is providing simple and affordable crop insurance cover for around 20,000 farms in Ghana, Kenya and Uganda via a smartphone app. The system uses high-resolution satellite images to detect rainfall and plant growth data. “With machine learning and blockchain technology, we can process the data very cheaply to produce a really simple crop insurance product with premiums of USD 20 to USD 50 for a farmer who might only be earning USD 3,000 a year,” WorldCover’s Christopher Sheehan told the Financial Times. “Even a farmer with limited literacy can understand an agreement where I say I’ll pay you if it doesn’t rain for a week.”
However, IBISA’s Annette Houtekamer-Van Dam cautions against viewing technology as a quick fix to solve farmers’ problems. “The biggest challenge for using technology in agricultural insurance is the availability of connectivity infrastructure. It’s true that mobile phones are widely used in developing countries, but these are often not smartphones. Using blockchain is great as long as there is connectivity in the area. This is why the enabler is an unreplaceable field partner.”
IBISA are already looking to expand their coverage for traditional smallholders. In India they have partnered with the DHAN Foundation, who specialise in developing innovations to combat poverty; BRAC and Care in Bangladesh; and in Kenya with Tulaa, a mobile commerce solution connecting suppliers, buyers and financial service providers to smallholder farmers.