Insurtech (insurance tech) Igloo is exploring the potential of providing blockchain-based insurance to farmers in the Philippines. This is to help address and prevent the losses experienced by the agricultural sector during typhoon season.
Quoting the Philippine Climate Change and Food Security Analysis (CCFSA) study commissioned by the World Food Programme, Igloo said typhoons and other extreme weather events have cost the country approximately P290 million in agricultural damages in the last decade. The recent typhoon Paeng alone caused Php 3.16 billion in damages to the sector.
“Often, families of farmers decide to sell land for more immediate income amid pressing needs and what would have been the next generation of farmers are seen to pursue better-paying jobs,” shared Mario Berta, country manager for the Philippines at Igloo. “On top of these challenges, there are recurring natural disasters that significantly hurt the livelihoods of farmers. This calls for a strengthened initiative that will mitigate the impact of catastrophes.”
Igloo hopes to assist farmers in preparing for the worst and ensure fastest recovery in the event of loss of livelihood after a typhoon. The insurtech believes that the provision of crop insurance can help and will enable farmers to begin farming anew after a calamity.
“However, the current process of insurance claims settlement takes a lot of time and requires tedious backend processing,” Igloo said. “In addition to this, agents have to brave the difficult journey of visiting farms in the wake of typhoons and manually assess the damage to the insured’s assets. This extended processing time adds to further loss of income for the farmers.”
“Crop insurance needs to be automated so the farmers can receive their payouts sooner and get back on their feet quicker,” said Berta.
Igloo facilitates digital insurance underwritten by partner insurance companies and offered in partner distribution channels such as e-commerce platforms and mobile wallets. Recently, Igloo introduced Weather Index Insurance, its first blockchain-based parametric insurance that automates claims through a smart contract on the blockchain.
Weather Index Insurance
Weather Index Insurance is an innovative approach to insurance provision that pays out benefits on the basis of a rainfall level, the predetermined index, for loss of assets and investments resulting from weather and catastrophic events. The claim is automatically paid when the rain index hits the flood or drought threshold. This eliminates the need to individually verify claims thereby reducing transaction costs, and allowing for a quicker claims settlement process. The business rules governing claims payout being hosted on a public blockchain help leverage the attributes of transparency, consistency, and unbiasedness thereby making the setup credible.
“We believe that Weather Index Insurance is a potential product that will reduce the vulnerability of farmers to adverse weather conditions. The expected increase in the speed of claims processing will enable farmers to have a better chance of recovery from catastrophes and increase productivity and competitiveness,” added Berta.
However, he also recognized that there are challenges needed to be addressed to make blockchain-based insurance appealing to farmers. These hurdles include the country’s low insurance penetration rate, financial inclusion, and access to digital services in rural areas, among others.
“When we bring Weather Index Insurance to the Philippines, Igloo will work with organizations such as rural banks, farmer’s cooperatives, and relevant government agencies to address these pain points and ensure that the insurance solution becomes a viable option that farmers can rely on for faster recovery,” said Berta.
The Weather Index Insurance is set to roll out in more agriculture-driven countries in Souhteast Asia including the Philippines, Indonesia, and Thailand. Igloo is currently speaking to potential partners that can underwrite and distribute the product to underserved farmers in Luzon, Visayas, and Mindanao.