The Agricultural insurance penetration in Africa is still very low despite efforts by the insurance market. With only 3% of the Sub-Saharan Africa population insured, Agricultural insurance penetration is at less than 1%. As a parametric solutions are being enforced to encourage smallholder farmers to access micro-insurance at affordable terms, varied challenges are seen around transparency, affordability, lack of farmer financial history, education and awareness on agricultural insurance.
In order to address these challenges that have impacted the scaling and uptake of agricultural insurance solutions in Africa, we are working together with Etherisc to boost efficiency of existing insurance products with blockchain technology to reduce costs and improve attractiveness, profitability and reach by smallholder farmers.
The Blockchain technology if applied properly, will enable weather data to be fed directly to digitized insurance policies (blockchain-based smart contracts) to provide faster and cheaper weather index insurance solutions that can integrate into the value chain.
The insurance product is a weather index insurance that covers farmers against excessive rainfall and drought. For effective distribution, the product is packaged as a scratch card and partnerships with farm input companies has enabled us to bundle this insurance with farm inputs such as seeds and services like credit to increase farmer uptake. To further address the affordability component, this micro insurance product that allows smallholder farmers to pay from as low as $0.50 in premiums.
So far, the project has reached over 12,567 in Kenya and so far, with at least 511 farmers being able to receive mid-season payouts during the Long Rains 2021 season. The insurance is primarily distributed through the Village Extension Service Providers (Village Champions) who are trained smallholder farmers that act as change agents to transfer the knowledge to their peer farmers. Smallholder farmers have in the past shied away from insurance due to lack of knowledge and transparency on how insurance works. The blockchain system innovation stores in an unchangeable state the pay-out criteria, and avails this information to the farmers. Thus, enhanced trust.
The uptake of this innovation will do a lot of good and pave way for efficiency and accuracy to the insurance ecosystem as another challenge in administering agriculture insurance has been delayed claims processing that denies farmers the opportunity to receive timely pay-outs and re-invest in their farms within the next planting season. To address this challenge, the blockchain system automates the product pricing and contract review process that generates the payout schedule timely and effectively.