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Nairobi 16 July, 2014 - Presentation by Rahab Kariuki (ONE ACRE) at the Fin4Ag Conference.

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  • We tailored products for them, protecting them not only against weather but also disease, like the Maize Lethal Necrotic Disease through combined indexes where we combine weather data as well as area yield data.
    This combined product is a first in the market and due to the wide coverage feels like a real “crop insurance”.
  • ACRE

    1. 1. Rahab Kariuki Micro-insurance Learnings Nairobi, July 2014
    2. 2. This is why we use index insurance: a new kind of insurance that helps farmers cope with climate risks and does not require farm visits. 2 ACRE approaches insurance as if we were farmers Large scale farm: $1000 Premium - $50 Visit Costs + $950, insure vs. Small scale farm: $10 Premium - $50 Visit Costs - $40, can’t insure One single bad season affects a farmer for years. During one drought season, smallholder farmers can loose their entire harvest and lack the money to buy quality farm inputs the next season. Traditional agricultural insurance has not been able to protect them as it relies on farm visits to assess losses. The Challenge
    3. 3. Overview 3  Mandate: Develop and implement agricultural insurance products for smallholder farmers  Kilimo Salama/ ACRE started in 2009 by Syngenta Foundation and UAP Insurance in Kenya with 185 maize farmers  ACRE is an insurance surveyor doing product development, contract pricing and monitoring, client interface  Insured (through local insurance company, reinsurer) over 145,000 smallholder farmers in 2014 in Kenya and Rwanda, soon to launch in Tanzania
    4. 4. Risks Faced by Micro Insurance Providers 1. Product design risk – Too many risks all of which cannot be insured – Do not meet consumer expectations – Need high quality products • Faster claim settlement • Fewer exclusions • Wider coverage
    5. 5. Risks Faced by Micro Insurance Providers 2. Moral hazard- – Remoteness makes it difficult to verify – Clients can gain a lot and lose little 3. Adverse selection-  Individuals predisposed to risk more likely to insure  Distorts risk pooling 5. Pricing – Need to balance coverage, sustainability and affordability
    6. 6. Risks Faced by Micro Insurance Providers 6. Inadequacy of distribution channels – Challenge is to minimize distribution costs 7. Income variability- – Informal sector – Low and unpredictable – Should be able to pay when they have money 8. Regulatory risk
    7. 7. Business Model: a social business in the insurance sector Primary Insurer • Carries primary risk • Policy documentation • Claims Payment ACRE Head Quarters in Nairobi • Product development Local offices (Kenya, Rwanda as of 2013) • Marketing and Distribution • Financial education • Data collection Income from operating margin charged on premium Any profits are reinvested in the company All regulated entities as per local insurance acts Re-insurers Pricing, reinsurance Partners: Agribusiness/ Banks/ MFI’s/ NGO’s/ Mobile Operators • Insured on behalf of farmers • Advance the premium • Inform individual farmers • Disburse compensation Farmers Access services including insurance
    8. 8. Mixed Weather and Yield Insurance
    9. 9. Client-specific Communication and Registration Are interested in the harvest Buy the harvest Improve farmers incomes Mass Market Simple product- Germination cover Simple explanation- Radio jingle 21 days no rain Simple registration- SMS Contract Farmers Tailored Product Farmer termsheet Registration via policy document Agribusiness/MFI Tailored Product Term sheets signed by bank managers Farmers insured for loan values
    10. 10. Current Product Portfolio and Partnerships 10 Crop Covered Risk Covered Ag Package Covered Target Farmer Distribution Partner Maize, Beans, Potatoes, Sorghum & Millet Weather and Yield cover Ag-Credit for Inputs & Training 0.5 acres Maize and Beans Seed Weather and Yield cover 5-1000 acres Coffee/ Tea Weather cover 1- 200 acres Livestock Animal Mortality Value of animal and Veterinary care Owns 2-3 dairy cows Maize Germination of hybrid seed Seed Bag 1 acre = 8 bags of seed Wheat Weather cover Ag-Credit for input package +200 acres A product developed for a 1/4 acre maize farmer in Rwanda can also serve a 1000 acre maize farmer in Kenya, allowing for our team to leverage technical design product features.
    11. 11. In 2012 our insured farmers in Kenya invested nearly 20% more in their farms and earned 16% more income than neighboring uninsured farmers.
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