Seeds of Prosperity

Crop Insurance for Developing Countries

Ian Hopkins | Sandeep Chandur | Laura Boudreau | Daniel Broome

Problem Exposure to natural disasters reduces propensity to purchase

quality farm inputs. Fear of extreme weather events i.e. drought, flooding, wind, etc. prevents

small farmers from buying improved seed and other inputs. Example: half of Kenyan farmers use poor-quality seed from previous

harvests resulting in sub-optimal yields.

Crop insurance facilitates food security. Crop insurance mitigates exposure to extreme events, could facilitate access

to financing, encourages the use of higher quality inputs, ultimately improves yields, and food security.

Technology reduces cost of providing insurance. The provision of crop insurance is currently limited by the disproportionately

high administrative costs of conventional insurance practices. Innovative parametric insurance products reduce administrative complexity while SMS based payment interfaces provide for rapid and secure settlements.

There is a need for a platform capable of brokering, monitoring, settling, and auditing insurance coverage and payouts.

Slide 2

Solution Technology.

By using a very simple text message interface the solution provides an automated method of receiving input, brokering quotes, facilitating the purchase via payments by phone, confirming the purchase, monitoring weather conditions, and triggering payouts.

The platform was built in Java using Google AppEngine, Big Table and an SMS gateway.

The platform allows for pluggable insurance providers and protocol for expansion.

Slide 3

Process Flow

Slide 4a

Stakeholders and SystemsVendor

Customer

System

Insurance providers

Process Flow

Slide 4b

Request quote (SMS)

Quote - Request,<Cust ID>, <Location>,<Qty>, <Product>,[<Qty>,<Product>]

Customer

System

BuiltPlanned

Vendor

Return quote (SMS)

Source best quote

Process Flow

Slide 4c

Quote – Return,,<Cust ID>, <Premium>

Vendor

Customer

System

Insurance providers

BuiltPlanned

Execute purchase (SMS)

Initiate payment

Process Flow

Slide 4d

Pay premium

Quote – Return,,<Cust ID>, <Premium>

Agree purchase with customer

Vendor

Customer

System

Insurance providers

BuiltPlanned

Confirm payment

Process Flow

Slide 4e

Vendor

Customer

System

Insurance providers

BuiltPlanned

Coverage,<Policy Id>, <Expiry>,<Risk>, <Qty>,<Product>, [<Qty>,<Product>]

Confirm coverage with customer (SMS)

Process Flow

Slide 4f

Extreme weather event notification (SMS)

Customer

System

Insurance providers

BuiltPlanned

Initiate payment

Notify insurer

Process Flow

Slide 4g

Report payment

Notify customer (SMS)

Customer

System

Insurance providers

BuiltPlanned

Make payment to customer (SMS)

Availability of crop insurance will lead to a virtuous cycle of improved access to financing, the use of higher quality inputs, higher yield and improved food security.

Advantages to Rural Commuities

Slide 5

Advantages to Sponsoring Organization Gather statistics on farming in developing

countries Number of farmers, amount and value of inputs,

concentration of agricultural activity Direct participation in micro finance and insurance

Reduce dependence on NGO’s and local governments to distribute development funding

Create communities of farmers Ability to disseminate information to farmers (SMS)

Influence and accelerate the adoption of mobile money

Ability to measure and study mobile money economy

Slide 6

Role of Intermediary Governance

Independence from the interested parties will ensure the integrity of payouts. (i.e. by separating the collection of weather data from the insurance providers).

Protection against monopolistic practices By providing for multiple insurance providers and by

searching for the best quote the system will protect customers and prevent the emergence of monopolies.

Infrastructure investment As an intermediary responsible for transactional

integrity there will be a requirement to invest in weather monitoring infrastructure.

Slide 7

Accomplishments to Date & Next Steps Selection of insurance partners Refine requirements Investigation of SMS protocol Integration to mobile payment

infrastructure (M-PESA in Kenya) Security and auditing Develop commercial partnerships Infrastructure funding needed for

monitoring stations and enhancements technology development

Slide 8