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The story of Index Based Livestock Insurance (IBLI)

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Presented by Rupsha Banerjee at a workshop on Microinsurance Business Models for Africa, Lusaka, Zambia, 11 March 2015

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The story of Index Based Livestock Insurance (IBLI)

  1. 1. The Story of Index Based Livestock Insurance (IBLI) Dr. Rupsha R Banerjee (Post-doctoral Fellow) Microinsurance Business Models for Africa Parallel Session Agriculture –11 March 2015 Zambezi Sun, Zambia
  2. 2.  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
  3. 3. Where we are currently working Source: Google images and Vrieling ,2014
  4. 4. 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
  5. 5. 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 for constructing 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 period For LRLD Sale period For SRSD Predicted SRSD mortality is announced. Indemnity payment is made if IBLI is triggered Period of NDVI observations For constructing SRSD mortality index Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Period of NDVI observations for constructing 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 period For LRLD Sale period For SRSD Predicted SRSD mortality is announced. Indemnity payment is made if IBLI is triggered Period of NDVI observations For constructing SRSD mortality index Different payout timings
  6. 6. 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
  7. 7. Data August /September Sales 2014 County Underwriter 1 Underwriter 2 Nos. of clients Premiums No. of clients Premiums Commissions Marsabit … … 288 242,573 15,403.278 Isiolo 60 106,655 104 339,186 20,351.16 Wajir 150 674,235 … … … Total 210 780,890 392 581,759 35,754.438
  8. 8. Main barriers to development  Infrastructure o Poor basic infrastructure ,low literacy levels, security issues  Understanding and acceptance o 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 Development o Non-recurrance of information, remuneration and coordination among underwriters and agents
  9. 9. 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 own o Bundling of services
  10. 10. Putting lessons to Practice contd…  Recurrence of Information o SMS , talk shows and contact information of agents with community members, radio campaigns, financial literacy programmes , jingles  Post sales evaluation
  11. 11. Not just education… Edutainments Radio programmes
  12. 12. But also getting feedback …
  13. 13. Looking ahead
  14. 14.  From asset replacement to asset protection  Simplification of existing training modules through the process of gamification (C:UsersbrupshaDropboxRupsha's filesTraining Method Overhaulsatellite 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…
  15. 15. 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
  16. 16. Thank you for your attention  For more info: https://livestockinsurance.wordpress.com/ Questions??

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