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Farmers in arid areas to access insurance

By Peter Muiruri
Dried up maize plant.

What do you do if your crop fails due to insufficient rain?  Simple, count your losses and hope for a better season the following year. Sadly, that has become the rule rather than the exception for subsistence farmers in Kenya.

Crop failure has become common, thanks to effects of climate change that farmers know little about.

However, there is hope on the horizon for farmers who lose their crop in this manner. WorldCover, a New York and Africa-based climate insurance provider to smallholder farmers, has raised Sh600 million that farmers in Kenya will draw from as crop failure insurance cover.

This is the first time for a company to price rainfall insurance for smallholder farmers. Other countries that will benefit from the fund include Uganda and Ghana.

Last year, the firm worked with farmers in Makueni County, one of the areas worst affected by crop failure. According to published research about the county, Makueni has unfavourable climatic conditions including drought and poorly distributed rainfall resulting in low productivity and frequent crop failure.

Hollings Mutisya from Kikumini is one such farmer who has faced the wrath of climate change in Makueni, having experienced crop failure season after another.

To cushion himself from vagaries of crop failure, he approached the firm’s representatives in the region who sold him a modest maize policy cover. His premiums started from as low as Sh1,000.

Early this year he received the first payout of Sh10,000, something that he says changed his maize cultivation. He was among more than twenty farmers in his area who benefited from the policy.

“Few friends and I joined hands and purchased a pair of bulls that we use to plough the land. We have also purchased more maize that we have stored to boost our food security. I have become serious with paying my policy with the firm since am assured of something if the rains fail,” says Mutisya.

In Kenya, 80 per cent of farmers under the programme received a claim as the drought situation worsened. Farmers are able to use the proceeds of the cover for other social-economic needs such as school fees and health that would have been funded from the proceeds of agriculture.

WorldCover leverages on newly available technologies to create an easy-to-use and affordable insurance policy. The key proprietary platform is an algorithm which combines weather and crop yield data from satellites and remote stations. Much of this data is collected from its growing network of farmers.

By using such scientific methods, the company is able to cost-effectively eliminate fraud and provide instant payouts via mobile money.

“WorldCover has uniquely combined technological advances and developed a solution that allows us to support smallholder farmers caught in conditions that are worsening due to climate change," said Christopher Sheehan, the company’s CEO and co-founder.

Jason Schapiro, the firm’s lead engineer says the algorithms are specifically calibrated to rainfall events by region and crop type, automatically triggering instant payouts to insured farmers through mobile money services like M-PESA.

“This eliminates the need for time-consuming loss assessment and other traditional insurance practices that are incompatible with serving remote farmers in emerging markets,” he adds.

Sheehan says that despite the rise of many insuretech startups around the world, the company is excited about the success of the Serie A round of funding as it accelerates growth in existing markets while working towards expansion into new regions.

The company was founded in 2015 and launched as a fintech marketplace for climate insurance.

It is currently addressing $50–100 billion (Sh5-10 trillion) in annual losses from natural disasters. Less than one per cent of this loss is insured.

The uninsured 99 per cent are concentrated in emerging markets such as Kenya.  The risk is especially fragmented among millions of small businesses, particularly farmers.

Such farmers are often in remote areas without access to cost-effective insurance products protecting them against the devastating loss of income due to climatic conditions.

Among the notable financiers of the fund include the Catalyst Fund, a grant program funded by the Bill and Melinda Gates Foundation and J.P. Morgan.  

pmuiruri@standardmedia.co.ke   

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