Index Based Crop Insurance Initiative Kenya April 2012
Presentation Outline 1. What is Index Insurance? 2. Why do farmers need insurance? 3. What is Kilimo Salama? 4. How does Kilimo Salama work? 5. Key challenges and success factors
What is weather index based insurance? Weather station measures conditions No farm visits = low admin costs Relation rainfall & crop growth using agronomic models Covers defined shared weather risks (drought, excess rain, frost, weather related disease) If weather station shows loss, then all insured farmers are paid, irrespective of on-farm loss Farmers encouraged to take care of their farm Quick disbursement of payouts Example Agronomic model
Why do farmers need insurance: the case of Jane Jane Gathoni Simon Planted 1/2 acre of maize in Laikipia, Central Kenya in 2009 Jane planted 4kg of hybrid maize seed in March worth 20 USD Normally she would have planted relief seeds following such a drought. Since she was insured she bought maize seed AGAIN worth 18 USD in October 2009 And harvested 2 bags of maize (80 USD) the following January With the comfort of insurance, she has now planted 1 ½ acres of certified maize seed and is starting to use fertilizers.
Implementing Index Insurance: Kilimo Salama What is Kilimo Salama? Kilimo Salama (= Safe Farming) initiated in Kenya in Dec 2008 Micro insurance product insuring farm inputs (seeds, fertilizer, chemicals) against drought or excess rain Insuring 200 farmers in 2009, 11,000 farmers in 2010 and 23,000 in 2011. We have so far insured 50,000 farmers in 2012 crop season Kilimo Salama Joint project between UAP Insurance and Syngenta Foundation for Sustainable Agriculture Other partners to the project are: Fertilizer distributor MEA Ltd Pesticide distributor Syngenta EA Ltd Mobile phone provider- Safaricom
How does Kilimo Salama work? 1. A farmer can buy insurance at a 5% premium at an input shop when purchasing farming inputs. 2. The insurance is monitored through automated weather stations 3. Registration is done on mobile camera phones by the input dealers 4. Payouts are made based on weather data recorded at the weather stations, there are NO farm visits 5. Payouts are transferred through the mobile payment system M-Pesa 6. Farmers questions answered through a toll free helpline 7
How does Kilimo Salama work? Mobile Phone Platform Contract Administration: Administering and monitoring policies Monitoring stockist performance Managing cash flows with stockists Monitoring training activities and performance Communication function: Communication with farmers Providing additional crop advisory services to farmers during season 8
9 How does Kilimo Salama work?
10 How does Kilimo Salama work?
Claims Settlement process MPesa Agent 4. Farmer takes out the payout at an Mpesa Agent. Cash Withdrawal SMS 3. Farmer is notified of Payout to MPesa account GPRS Bank Transfer 24 1. Weather station & contract triggers payout 2. Payout is made to Mpesa account
Marketing & Communication Communication channels Field days Farmer group trainings Radio show Telephone helpline Focus group discussions
Success Highlights 1. Product Information and Training: No one believes insurance until they or their relatives receive payouts The first pilot during the 2009 season recorded the worst drought in last 20 years, In this region, insurance registrations increased threefold in the subsequent 2010 season.
Key Challenges The Products Mix: Striking a balance between Indemnity based and Weather Index Products- Not all weather risks can be transferred through index based solutions e.g. Fire and Hail. Insurance Infrastructure: Insufficient weather data, number of automatic weather stations, Quality historical weather data. Basis risk: Defined as; when a famers suffers loss and the index does not show that there is a payout. Marketing and Distribution: Due to many farmers involved scaling up is only viable if registration and payouts are paperless. Distribution through Agro-vet shops; Insurance is not their core product - Insurance registration process must be fast and convenient Regulatory approvals for alternative distribution channels.
Kilimo Salama Summary
Thank You
context of agriculture risks:- catastrophes