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.
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 Ã¢â‚¬“ with its two microinsurance powerhouses China and India Ã¢â‚¬“ 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.Ã¢â‚¬
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.
A segment on rebuilding Haiti on NPRÃ¢â‚¬â„¢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.