A blockchain based parametric weather insurance product has made its first payouts, after severe weather impacted smallholder farmers covered by the product in Sri Lanka.
Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Blockchain based parametric weather insurance in first payouts
Artemis | Steve Evans | Nov 7, 2019
A blockchain based parametric weather insurance product has made its first payouts, after severe weather impacted smallholder farmers covered by the product in Sri Lanka.
The parametric insurance was launched in a pilot phase a year ago, as Oxfam in Sri Lanka teamed up with insurance and reinsurance broker Aon and insurtech blockchain solutions provider Etherisc, alongside local insurer Sanasa, to deliver a responsive risk transfer solution that could be rolled out affordably in developing regions, with the goal of making automated payouts to smallholder farmers when extreme weather conditions occurred.
The pilot launched with around 200 farmers enrolled that were exposed to the risk of losing their crops due to extreme weather. After the first year, the system has made some pay-outs to farmers in this initial operations phase, the parties behind the product announced.
Now, the parties involved will move onto the next phase of the project as cropping season starts in November, seeking to solve any issues raised during the pilot with the goal of refining the system’s efficiency and increasing the scale the number of farmers that will benefit from the parametric microinsurance.
“We are proud to have real-world, on-the-ground success from a blockchain solution for microinsurance,” commented Michiel Berende, Chief Inclusive Officer at Etherisc. “We are delighted with the first phase results and we are excited to drive on and help more farmers.”
The blockchain based solution simplifies a number of issues related to insurance that can challenge the uptake of new products in developing regions, in particular thanks to the fact payouts can be automated and based on easily tracked weather parameters.
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As a result, the claims process is significantly simplified, meaning a farmer does not need to submit a claim while the insurer does not need to send a claims adjuster into the field.
This means greatly reduced administration costs for delivering the crop weather insurance product, so more of the premium can be used for claims payment and making immediate pay-outs.
The next phase will involve looking into issues raised during the pilot around lack of connectivity for some farmers, the lack of adoption of digital payments, and the need for more weather data sources to augment weather station data.
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