ACRE Africa
Sustainable Agriculture through Agriculture Insurance
Rahab Kariuki, May 2017
Contents
1.
About Acre Africa
2.
Introduction to Agriculture Insurance and KPIs
3.
Why index insurance?
4.
A few challenges of scaling agriculture insurance
5.
Conclusion
About ACRE Africa
Founder
⁻ Micro-insurance product designer linking stakeholders to
agricultural insurance through localized solutions to reduce
climate risks
⁻ Licensed insurance intermediary, supporting
Impact Investors
local
insurers to offer smallholder-focused insurance across
value chains
⁻ Offices present in Kenya, Rwanda and Tanzania
⁻ 32 professional staff with expertise in Insurance,
Agriculture and Veterinary Sciences, Actuarial Science,
Marketing, Strategy and Finance
Acre Africa’s Role on the Value Chain
Source: World Bank, 2011
Available Products in East Africa
MPCI- inspection based yield guarantee
Livestock Index Based Insurance
Seed insurance, Season weather and Area Yield index
Dairy Insurance-Indemnity based
Hybrid- Index and MPCI
Why Index Insurance?
⁻ According to FAO 80% of farmland in sub-Saharan
Africa and Asia is managed by Smallholders.
⁻ While 75% of the world’s food is generated from
only 12 plants and 5 animal species, making the
global food system highly vulnerable to shocks.
⁻ Index insurance is a relatively new but innovative
approach to insurance provision that pays out
benefits on the basis of a predetermined index (e.g.
rainfall level) for loss of assets and investments
KPI: Premium per life is high for Agriculture
Source: State of Micro insurance 2016, Micro insurance Network
KPI: High Aggregate Claims Ratio
Ratios were calculated as claims paid over gross written premiums
Source: State of Micro insurance 2016, Micro insurance Network
Challenge 1: “Insurance is sold not bought”, but
farmers do not trust insurance sales men.
⁻ Regulatory framework does not allow unlicensed parties to distribute insurance
⁻ Applied for an exemption in Kenya to allow agro input shops
Roles played by Agro-input
shops:
1. Premium aggregation
2. Product Information
3. Registration of insured
4. Hold a physical master
policy document for
reference
Challenge 2: Insurance is not incorporating risk
Reduction
⁻ Most insurance approaches do nothing to reduce risk. Perhaps they even introduce
moral hazard.
⁻ Even insured farmers have a challenge coping with poor seasons. Our data shows that
50-70% of farmers insuring seed skip a season after a payout depending on how poor
the season was.
Challenge 3: Insurance is not demand driven yet
⁻ Most index insurance programs since early 2000 have been developed and financed
by donors not risk carriers (insurers or local governments). Is the opportunity clear?
⁻ What can be done to support insurance?
⁻ ICT and the data revolution can be harnessed to improve index insurance so it
better captures the risks that are important to farmers and for reduction of basis
risk.
⁻ Increase of capacity of support services such as Actuarial services, loss assessment
and farmer aggregation and collection of KYC information.
⁻ Index insurance can be better integrated into on-going climate adaptation and
climate service initiatives.
⁻ We need innovative ways to deliver index insurance products to farmers.
An Introductory Micro Insurance Product Leveraging on Existing Seed
Distribution


2
1
Register
Purchase
Farmer prepares for
beginning of season
At start of season farmer purchases
insured bag
Opens bag on planting, finds card
inside
4A2
SMS unique code to short
code

4A1
Insured-Season
Full season cover Compensation
sent to farmer via mobile money
3
Successful germination=
automatic full season cover
4B2

4B1
Replant
So that farmer can replant and
harvest the same season
Compensation sent to farmer via
mobile money if no rainfall in
location
In the case of germination failure
after 21 days without rain
the Insurance Provider gets farmer
location from location based service
system which locates phone, and
monitors satellite imagery for that
location
Contact us:
[email protected]
www.acreafrica.com