The Potential for Scale and Sustainability in Weather Index Insurance

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CHAPTER 3
KEY DRIVERS OF SUSTAINABILITY AND SCALABILITY
OF WEATHER INDEX INSURANCE
including how the rainfall deficit computation panel (a tool to settle claims) works
and when payouts will be triggered. This is a useful model for easy communication
that could be replicated elsewhere (Case Study 3).
India – PepsiCo. A big part of the success of PepsiCo’s programme is due to its
contract farming arrangement with farmers, a package of production information
and support that includes an index insurance pilot. Product education was
provided systematically, with training and educational meetings conducted with
each programme participant. WRMS sent a weather data advisory message to each
farmer via mobile phone to promote corrective measures in advance of bad
weather, so that farmers knew what measures to take in the field to prevent
avoidable losses. This service was sent in a timely and regular manner and charged
separately to participating farmers. Training sessions on index insurance were also
organized at various warehouse facilities, a natural gathering point for farmers
(Case Study 2).
Brazil. AgroBrasil led an extensive marketing campaign to promote an area-yield
index insurance product in the State of Rio Grande do Sul. It dedicated about
45 people to marketing activities, placing ground teams close to distribution points,
and investing in promotion of the programme via radio, local offices of the State’s
Department of Agriculture and Supply (SAA), city halls and other distribution sites.
AgroBrasil also prepared educational materials to help interested farmers
understand the product. In a cartoon booklet, Mr Chico and Agricultural Insurance
(AgroBrasil Seguros 2008), a character named Segurito ® simplified insurance terms
and explained how the insurance product works (Case Study 9).
Nicaragua – INISER. The Nicaraguan Insurance Institute (INISER), a public
insurance company, began selling index-based insurance contracts in 2007 with
support from CRMG. The initiative was part of a pilot programme to insure
groundnut farmers against drought risk. But already in 2005, INISER and CRMG
had begun to lay the groundwork for the pilot through efforts to transfer technical
capacity in contract design to local insurers and to begin the business processes
needed to carry out the work. This effort required a significant time commitment
from the insurer and other stakeholders involved in the pilot. Training these
various stakeholders under the leadership of the local insurer was possible because
of the long-term commitment by CRMG, which required a three- to four-year
preparation before targeted farmers could start buying index insurance.
Lack of client awareness can hamper a product’s success:
Ukraine. In the Ukraine, there is a lack of understanding of insurance providers in
the market, and only a minority of farmers insure their crops. Insurance is still a
foreign concept to most. Producers did not realize that the pilot product was being
offered by the local insurance company; instead, they mistakenly believed it to be
an initiative by IFC and CRMG, which they were reluctant to trust. An inadequate