Tag Archives: Microinsurance

Human-wildlife conflict insurance: the next frontier for microinsurance?

AB Consultants and IIED at a consultative forum, Kenya

Most wildlife in New York City is of the insect or rodent kind (though a peregrine falcon did once hang out on my air conditioner for a few minutes.) Not so in many parts of the world, including Africa, Asia and parts of North America. And as human populations continue to expand into natural habitats, there arise the inevitable clashes between humans and wildlife.

There’s even a term for this phenomenon: “human-wildlife conflict” (HWC). The World Wide Fund for Nature (WWF) notes that this conflict includes wild animals destroying crops, killing livestock, damaging property – and even attacking (and injuring) humans themselves. Humans will often retaliate by killing wild animals to prevent future attacks.

One way to help communities at risk of wildlife conflict is (drumroll please) insurance. To learn more about this kind of insurance, I spoke with Barbara Chesire-Chabbaga, director and lead consultant for AB Consultants, an organization that aids in the development of microinsurance and digital financial services across Sub-Saharan Africa. Her company is actively working to develop a microinsurance product for human-wildlife conflict.

Human-wildlife conflict: deadly and costly

HWC is a reality of daily life in many places with high populations of both humans and wildlife. Take Kenya: more than 65 percent of wildlife lives outside protected areas, which means human-wildlife interaction is inevitable in communities that live near those protected areas.

Unfortunately, death and injury (for both humans and wildlife) are not uncommon outcomes of HWC. But crop damage is the most frequent cause of loss from HWC. Chabbaga noted that, in Kenya “close to 3,000 cases of crop damage were recorded between the years of 2015 and the first 2 months of 2017, compared with 148 death and injury incidences.” And these numbers probably underreport the frequency of HWC crop damage.

Furthermore, crop damage can have significant ramifications for communities that depend on farming and livestock rearing. A single attack that leads to crop damage could impact that year’s harvest, which can result in a financial domino effect that reverberates long after the attack.

Compensation schemes as financial mitigation

Chabbaga did note that compensation schemes for HWC are not a new idea, especially in areas with high rates of human-wildlife interaction. Indeed, financial mitigation for HWC has long been believed to yield significant benefits, by offsetting the actual losses themselves and by reducing wildlife retaliatory killings. Some of these schemes include the Big Life Foundation, the Amboseli Trust for Elephants and the Maasai Wilderness and Conversation Trust.

A typical compensation scheme will reimburse farmers for certain amounts if a wild animal destroyed their property, subject to certain conditions (like making sure that their farms are well-enclosed, and animals are well herded and away from protected areas, for example).

But straight compensation schemes have their limitations. They can be expensive, and often rely on donations, which leads to issues with financial stability and sustainability. Chabbaga cited a compensation scheme in the Mwaluganje elephant sanctuary, in which farmers yielded farmland for conservation purposes and were compensated yearly. But the scheme collapsed when funding ran out.

That’s where insurance comes in. “Microinsurance has the ability to pool larger numbers, employ technology and manage the entire client journey from registration to claim settlement in such a way that client value and the business cases are well-balanced,” argued Chabbaga.

Human-wildlife conflict insurance: better compensation, more sustainable?

“Human wildlife conflict is a new risk that has previously not been considered by insurance companies, but there is a general optimistic overview that HWC is an insurable risk worth exploring,” said Chabbaga.

AB Consultants is currently working on developing just that kind of HWC microinsurance in partnership with the International Institute of Environment and Development (IIED) and funded by the Darwin Initiative. Referred to as “Livelihoods Insurance From Elephants” (LIFE), the project is currently focused on two regions in Sri Lanka and Kenya, to determine how best to design an insurance product that can reduce losses for small-holder farmers and other low-income households from HWC. As you can probably guess from the name, the project is currently focused specifically on human-elephant conflict.

The LIFE project is still in the development phase and Chabbaga said that they’re still toying with the specific details of how to structure the policy, but she did give some idea of what the insurance will look like. “With microinsurance, the idea is to bundle as many risks as possible. With that in mind, it is possible that the scheme will include a majority, if not all, HWC related risks i.e. crop and property damage, death and injury.” Microinsurance typically has minimal exclusions, but for HWC insurance an important exclusion would be to deny coverage to a loss incurred by illegal activities such as poaching or trespassing into protected areas.

Consumers in the two pilot regions have so far expressed positive attitudes towards this insurance. The plan is to begin product rollout in January 2020.

For more information about microinsurance more generally, check out our webpage.

Blue Marble and Nespresso launch parametric weather insurance pilot for smallholder coffee farmers in Colombia

Blue Marble Microinsurance and Nespresso have developed  a pilot program to bring weather index insurance to coffee farmers in Colombia, according to a recent Artemis blog.

Coffee crops are exposed to great risk from weather conditions, and farmers in developing countries often lack insurance options. The program provides coverage for excess rainfall and drought during the developmental stages in which coffee is most vulnerable.

Satellite technology is used to obtain the data required to create the weather indices against which the parametric policies can be triggered. If excess rainfall or drought occurs in a covered area, payments can be made automatically and quickly without the need for time-consuming claims assessment.

“This pilot initiative helps to establish a support mechanism for smallholder coffee farmers in Colombia so that they can continue to thrive in the face of climate change,” said Guillaume Le Cunff, President and CEO of Nespresso USA.

The program is a good example of the growth of microinsurance, which provides affordable insurance coverage to low income populations in developing counties.

To learn more about microinsurance, click here.

 

Microinsurance: Rapid Expansion

Some 500 million people worldwide are now covered by microinsurance, a low-cost form of insurance for individuals generally not covered by traditional insurance or government programs.

In fact there has been a more than 500 percent increase in the number of people covered by microinsurance in just the past five years, according to the Microinsurance Innovation Facility of the International Labor Organization (ILO) and the Munich Re Foundation.

The second volume of Microinsurance Compendium, Protecting the poor just published by the two organizations says the number of people covered by microinsurance rose from 78 million in 2007 to 135 million in 2009, reaching nearly 500 million today.

Their findings show that Asia – with its two microinsurance powerhouses China and India – is spearheading the trend, covering roughly 80 percent of the market. Latin America accounts for 15 percent of the market and Africa 5 percent.

Large and dense populations, interest from public and private insurers, property distribution channels and active government support, are some of the reasons why Asia is ahead of the game, the report says.

While microinsurance policies are typically thought of as products for emerging markets, a recent blog post over at Insurance & Technology suggests that microinsurance projects are applicable to mature economies too.

In the post, Marik Brockman, of PWC Insurance Advisory Services, says:

Even though developed economies do not have the same customer segments, per se, as emerging ones, they too have significant numbers of working poor. The constraints of remote geographies, the working poor’s difficulty in affording insurance, and differing technology infrastructures in emerging markets have led to innovations to and efficiencies in microinsurance schemes that are applicable to low growth and under-penetrated mature life, health and property & casualty markets.†

Brockman concludes that developed markets experiencing stagnating economies, increasing income disparity, and the risk of more consumers dropping below the poverty line are likely to see insurers adapt microinsurance schemes to increase insurance adoption and drive growth.

An interesting idea.

Check out further Insurance Information Institute (I.I.I.) information on microinsurance.

Accessing Coverage Through Microinsurance

A segment on rebuilding Haiti on NPR’s Marketplace show Friday and featuring I.I.I. president Bob Hartwig, discussed the reasons why the private insurance market in Haiti is very small. It also raised the important question of what insurers are doing to provide private-sector insurance coverage to poorer nations. The answer is microinsurance. A growing number of insurers are tapping into markets in developing countries through microinsurance projects which provide low cost insurance to individuals generally not covered by traditional insurance or government programs. Microinsurance products tend to be much less costly than traditional products and thus extend protection to a much wider market. Speaking on the NPR show, Michael McCord, president of the Microinsurance Centre, noted that the potential market for microinsurance comprises individuals living on just $1 to $2 a day. While coverage is often geared to protection from natural disasters, it can also provide coverage for property and life/health risks. Insurers operating in the microinsurance arena include Swiss Re, Munich Re and Zurich Financial Services. In November 2010, the sixth International Microinsurance Conference will take place in Manila, Philippines. The event is hosted by the Microinsurance Network and the Munich Re Foundation. Just last October microinsurance was the main theme for the annual conference of the International Association of Insurance Supervisors (IAIS). Check out I.I.I. facts and stats on microinsurance.