Agricultural Index Insurance Initiative
Accelerating Agricultural Insurance in India –
the case of Kilimo Salama in Kenya
FICCI seminar, New Delhi, 5 February 2011
Fritz Brugger, Syngenta Foundation for Sustainable Agriculture
Kilimo Salama – Overview
• Background
– Kenya
– Insurance situation
– Partners
• Challenges
– Distribution
– Literacy
– Affordability
• Success factors
– Role of technology
– Product design
– Added value services
– Private sector partnerships
Agriculture Insurance Situation in Kenya
Insurance setup differs from India in several aspects:
• Product availability:
– Multi-peril crop insurance: product is in the Market, available only for large scale
farmers (500+ acres)
 9.6 mn Kenyans involved in smallholder agriculture (FAO CountrySTAT (2008))
– Index insurance introduced in 2009, still in pilot stage
• Role of government:
– Government plays no active role in providing agricultural insurance:
– No subsidies available
– No mandatory insurance linked to credit
– Limited availability of historic weather data and AWS
• Access to agricultural finance
– Limited because of magnitude of risk
Kilimo Salama – Partners
• Syngenta Foundation for Sustainable Agriculture
– Is a not for profit organisation with the mandate to support smallholder famers
by increasing productivity, improving access to markets, and mitigating
farming risks.
– Syngenta Foundation has been established by Syngenta International AG, an agro
chemical and seeds company that works in over 90 countries and has 26,000
employees.
• UAP Insurance Limited
– a leading Kenyan insurance and financial services company with a presence
in Kenya, Uganda and Southern Sudan.
– In March 2009 UAP insurance started a pilot to offer insurance to small farmers in
Laikipia district and is now looking to expand this.
• Safaricom
– Largest telecom operator in Kenya. Pioneered mobile payment service M-Pesa with
currently 9.4 mn accounts.
Current status of pilot and project goals
Insurance products are only sustainable if they can reach scale
We currently insure 12,000
farmers in 5 areas in Kenya
We aim to offer insurance to
farmers in all agricultural areas
in Kenya by 2012
This will require investment in:
The weather station network from
30 300
A significant investment in financial
education
5
Agroclimatic zones
6
Challenges to index insurance growth in Kenya
Challenges
Responses
Weather data
historic and AWS
Setting up network
Distribution
no branch network in rural areas
Use of new distribution channels
Transaction cost
high number of small policies
Use of technology
Affordability
high premium due to high risk
Product design
Partnerships
Added value services
Financial literacy
low insurance literacy
low trust in insurance
Training
Added value services
Automated Weather stations
• Setting up AWS network
• Rainfall, wind, temperature, humidity,
radiation, leaf wettness
• Remote monitoring of weather station
operations
• Security and operations
• Preparing private company
• Coordination with Kenya Met Dept
Overcoming the Distribution bottleneck
• Agrovets: Closest allies of farmers: Farming advice, Loans, Business
success
• 8’000+ agrovet shops across Kenya’s farming areas
– Small shops, Very busy around planting (up to 70% of sales in two month)
• Challenges
– Insurance is not their core product - but has a positive impact on their business.
– Insurance registration process must be fast and convenient
9
Mobile Technology – Reducing Transaction Cost
Distr
Mobile
Platform
MIS
CRM
Empower stockists
Policy management
Premium collection
Claims payment
• Training monitoring
Client communication
• Added value services
Kilimo Salama Mobile Application
Agrovets are given a mobile phone with the Kilimo Salama application.
When a farmer wishes to purchase insurance
the stockist starts the Kilimo Salama application
and registers the farmer in a four-step process
Farmer confirmation and payout
The insurance policy is automatically created on the
server and the farmer receives an instant confirmation of
his/her insurance coverage via SMS.
Payouts: Automated decision on payouts
Payouts to all farmers under the same
weather station
Payouts directly to the farmer’s phone (M-Pesa)
Making Marketing and Training more effective
1. Field staff holds the first training
2. At the end of the training the
attending famer send keywordsms to server
T101
3. All farmers are registered into the
database linked to an area and
trainer
4. Follow up information can be
requested by text or via a
helpline.
5. Future trainings and simple
extension information via mass
SMS.
6. When the farmer buys the product she uses her phone
number and she is recognised as linked to t101 = Joseph.
13
Cut costs on follow up training and mobilisation
Real time monitoring and rewarding of field personnel
Product design – removing the entry barrier
Entry barriers: lack of financial literacy, lack of trust
•
Create “entry level product” that allows farmers to “try out” insurance
•
Pay as you go
•
Over time, farmer can move towards higher level products
coverage
•
Expected value
of harvest
Value of input
+ Labor
Value of Inputs
premium
Affordability – partnership with input suppliers
•
Risk is high and therefore the premium for a reasonable risk coverage is high and
for many farmers beyond their affordability
•
Partnerships with the private sector as sustainable alternatives for subsidies
•
Input companies have interest in success of farmers
Partnership with private sector suppliers
50%
Agrocompany
50%
Farmer
Premium
Affordability – added value services
Agricultural Index Insurance Initiative
Thank you!
fritz.brugger@syngenta.com
Reducing transaction cost: Weather index based insurance
• Index model
– Relation weather conditions & crop growth
using agronomic models
– Historic weather data used for pricing risk
• Automated weather station measures
conditions
• If weather station shows loss, then all
insured farmers are paid, irrespective of onfarm loss
• No farm visits = low transaction costs
Automated Weather stations
• Send data every 15 minutes to central server
over GPRS network
• Store and resend data in case network is
down
• Solar powered
• Remote monitoring of weather station
operations
• Most weather stations are placed on public
ground (schools)
• Data are also provided to local schools, used
in geography classes