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Agricultural insurance for smallholder farmers: Digital innovations for scale

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Globally, less than 20 per cent of smallholder farmers have insurance. Low awareness of insurance products and the high cost of premiums have restricted farmer uptake of indemnity-based insurance services. Insurance providers have largely overlooked smallholders due to the cost of acquiring and serving rural customers.

Index insurance offers ways of overcoming some of the challenges of indemnity-based agricultural insurance models, such as high operational costs, the cost of premiums and the ease of settling claims. However, service providers face difficulties such as poor historical and current weather data availability, inadequate government support to provide certain index insurance services and effective distribution. To overcome these problems, index insurance services have been using mobile and satellite technology to digitise service creation and delivery, enhancing their potential to scale.

This report looks at how mobile network operators can use their assets to drive the adoption of index insurance services in developing countries. For instance, mobile technology can be used to register and locate farmers, mobile money can be used to collect premiums and pay out claims, and commercial microwave link data from mobile networks can be used to monitor rainfall. We analyse the challenges service providers face in scaling index insurance and the potential opportunities for growth through partnership-based approaches.

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