Around the world, digital tools continue to offer new possibilities for the way farmers manage their land and harvests. In particular, digital tools have changed the potential for agricultural insurance and the way that farmers manage unforeseen risks. As technology continues to improve, this realm of possibilities continues to expand.

Technology and digital tools are expanding agricultural insurance’s reach, increasing client engagement and lowering costs, allowing more and more smallholder farmers to experience its benefits. Consider the widespread adoption of index insurance, for example. Index insurance pays policyholders when levels of a pre-specified index (or triggers), such as rainfall, are reached. The index can be measured by weather stations, satellite or other devices and has the ability to provide policyholders with near instant payouts, releasing funds as soon as these trigger levels are observed to be met. While commonplace today, this type of product would not have been possible without the technological advances we have seen in recent decades. As detailed in USAID’s newly released, “Using Digital Tools to Expand Access to Agricultural Insurance,” tools as simple as mobile money to as complex as drones are revolutionizing farmers’ access to insurance.

Mercy Corps, a global humanitarian agency working in some of the world’s toughest places, has been working with insurance since 2011. In responding to the devastating 2010 Haitian earthquake, Mercy Corps turned to insurance as a means to promote long-term resilience for the country’s vulnerable populations. In a matter of seconds, many microfinance clients lost assets that they had spent years working to build up. Index insurance can prevent devastations like these, providing rapid payouts to help the insured cope with the aftermath of such shocks. Additionally, purchasing and holding insurance before a large shock can encourage policyholders to invest more into their productive activities, simultaneously increasing both policyholders’ productivity and resilience.

Created in 2011 in the aftermath of the Haiti earthquake, Mercy Corps’ largest insurance initiative is the Microinsurance Catastrophe Risk Organisation (MiCRO). Since expanding to Latin America, operating with banking and cooperative channels in Guatemala, El Salvador and soon Colombia, MiCRO utilizes technology solutions to design and implement index insurance solutions to low-income populations across the region. These include the following:

• Index insurance – coverage for rainfall and drought using satellite measurements of rainfall and vegetation, and coverage for earthquake using USGS[1] measurements of ground vibrations.
• SMS client communication – when index measurements indicate a payout, clients are notified of their pending payout by SMS message to their mobile phones.
• Back-office claims administration – MiCRO has developed a proprietary calculation platform “MiCAPP” that continually downloads index data in real-time, monitoring for trigger events. When a trigger is detected, the platform automates an email message that is sent to all organizational stakeholders to notify of the trigger event, the affected areas, and the payment amount due.
• Potential for blockchain and payments partnerships – as a future enhancement of the calculation platform, MiCRO sees the potential for payout calculations coming from MiCAPP to be verified by the blockchain, adding increased transparency. The functionality of the MiCAPP platform could also be extended beyond email messaging to releasing insurance payments, further increasing the speed by which policyholders receive their payouts.

These examples from MiCRO’s work show how technology is already improving outreach (through index insurance), increase client engagement (through SMS communication) and lower costs (through automated back office administration). New technologies such as blockchain open even more possibilities for future improvements to MiCRO’s offering.

It is thinking about the future that holds the most excitement. Technology is constantly evolving and opening new possibilities. Advances have brought us to where we are today, but what comes next will allow agricultural insurance to obtain even further outreach, provide greater value and be of a lower cost. Investing in digital tools creates a journey for what is possible, improving not only today’s offering, but what might be possible to achieve tomorrow and in the future.

To learn more about MiCRO visit: www.microrisk.org

This blog is posted in a series to raise awareness on the guide Using Digital Tools to Expand Access to Agricultural Insurance. Read the first blog here: How Can Digital Tools Improve Access to Agricultural Insurance? Read the second blog here: AMA Innovation Lab and D2FTF Use Digital Tools to Break Down Barriers to Agricultural Insurance and the third blog here, Four Best Practices to Make Agriculture Insurance More Available and Affordable.

[1] United States Geological Survey

By Josh Ling, Director of Financial Inclusion, Mercy Corps