The vast majority of smallholder farmers do not have crop insurance, estimated at around only 1% in coverage. GSMA studied the microinsurance sector in Kenya and noted that “under 10% of services tracked offer agricultural insurance.” Meanwhile, according to the FAO, climate change disproportionately impacts smallholder farmers due to their direct dependence on natural resources and detachment from the extension services and social protection systems that could enable them to build their capacity and resilience.” Insurance companies find it expensive to reach rural populations and make a profit offering crop insurance to smallholder farmers, and at the same time, farmers now need it the most. This gap is $100 billion and impact hundreds of millions of smallholder farmers around the world.
In Kenya, the State Department of Agriculture informed Sprout that they spend 5 to 10 times more on emergency relief operations than they do on fully subsidizing pastoralists for drought insurance. The opportunity for governments to also become independent of aid is an enormous opportunity.
We compared data relating to the development and operating of our first insurance pilot and that of a large reinsurer. We found that while our decentralized product required up to three intermediaries, a typical centralized product made use of between six and. Our claims ratio was between 60 and 95%, compared to a ratio of 25-60% for a similar centralized product. Furthermore, our operating costs were significantly lower (at 3-5%, compared to 30-40% for the similar traditional product).
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