The Story of Index Based Livestock Insurance (IBLI)

Dr. Rupsha R Banerjee(Post-doctoral Fellow)

Microinsurance Business Models for AfricaParallel Session Agriculture –11 March 2015

Zambezi Sun, Zambia

Drought is a major threat to livestock in the ASALs

Responses to climatic shocks o Migration, Water tracking , migration, selling livestock

Important to protect pastoralists against drought-related livestock losses

IBLI is designed using Normalized Difference Vegetation Index (NDVI)

One of its kind since it promotes market based solutions

The Project

Where we are currently working

Source: Google images and Vrieling ,2014

The Product - What it was and what it is

Was based on statistical relationship between area-average livestock mortality and forage availability o Payouts were received when the

predicted mortality exceeded a particular trigger

Is now designed to protect against prolonged forage scarcity. o Triggers payment to help maintain

their livestock in the face of severe forage scarcity

The Product – What it was and what it is cont..

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Period of NDVI observations forconstructing LRLD mortality index

Predicted LRLD mortality is announced.Indemnity payment is made if IBLI is triggered

LRLD season coverage SRSD season coverage

1 year contract coverage

Sale periodFor LRLD

Sale periodFor SRSD

Predicted SRSD mortality is announced.Indemnity payment is made if IBLI is triggered

Period of NDVI observationsFor constructing SRSDmortality index

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Period of NDVI observations forconstructing LRLD mortality index

Predicted LRLD mortality is announced.Indemnity payment is made if IBLI is triggered

LRLD season coverage SRSD season coverage

1 year contract coverage

Sale periodFor LRLD

Sale periodFor SRSD

Predicted SRSD mortality is announced.Indemnity payment is made if IBLI is triggered

Period of NDVI observationsFor constructing SRSDmortality index

Different payout timings

What have we been trying to do

Make IBLI a sustainable commercially viable product

Create an informed demand

Reach out in areas where markets often shy away from

Provide additional mechanisms by which pastoralists are better prepared against climatic risks

Get the pastoral community out of the ‘freebies’ culture

Data

August /September Sales 2014County Underwriter 1 Underwriter 2

Nos. of clients Premiums No. of clients Premiums Commissions

Marsabit … … 288 242,573 15,403.278Isiolo 60 106,655 104 339,186 20,351.16

Wajir 150 674,235 … … …

Total 210 780,890 392 581,759 35,754.438

Main barriers to development Infrastructure

o Poor basic infrastructure ,low literacy levels, security issues

Understanding and acceptanceo Most pastoralists don’t clearly understand the basic concepts of IBLI

and have liquidity constraints

Lack of visibility o Sporadic appearance during sales period and rapid disappearance

after that

Capacity Developmento Non-recurrance of information, remuneration and coordination

among underwriters and agents

Putting lessons to Practice

Restructuring the current Agency Model o Individual and group models involvement of community

members to become agents o Certificate of Practice for sales agents by the IRA

Embedding services o Partnerships which help in embedding the product as their owno Bundling of services

Putting lessons to Practice contd…

Recurrence of Informationo SMS , talk shows and contact information of agents with

community members, radio campaigns, financial literacy programmes , jingles

Post sales evaluation

Not just education…

Edutainments

Radio programmes

But also getting feedback …

Looking ahead

From asset replacement to asset protection

Simplification of existing training modules through the process of gamification (C:\Users\brupsha\Dropbox\Rupsha's files\Training Method Overhaul\satellite animation 3.gif)

o Rating tool and automation of index announcements o Adoption of a blended learning approach

Using smartphones to revise fundamental concepts of IBLI

Evaluation of new tools and customization as required

Looking ahead contd…

Source: Douthwaite et.al Agricultural Systems 2002

Need for a systematic reflection on experiences from an institutional learning and change (ILAC) perspective

Multistakeholder engagement drawing from innovation platform concepts

What can we all do

Active roles of governments to support strategy, planning and having a legal framework

Thank you for your attention For more info: https://livestockinsurance.wordpress.com/

Questions??