Agriculture Insurance

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Agriculture Insurance

INNOVATION NAME: Agriculture Insurance
TYPE OF INNOVATION: Weather-Related Risks Mitigation Tool for Marginal Farmers
DURATION: 2015 – Ongoing

Bangladesh is the 6th most-affected country by climate change and US$ .8 billion economic losses occur from natural disasters. As the country’s 39% of the population is directly dependent on agriculture and the sector contributes 12.68% in the GDP; the consequences of natural disasters echo in many adverse ways including incurring financial losses, crop damages, increased production cost, and loss of investments. To address the financial insecurity of the marginal farmers, Green Delta Insurance Company Limited started Weather Index Based Crop Insurance.

In 2015, Green Delta, jointly with IFC of World Bank Group, started this initiative as a pilot project and later in 2018, successfully commercialized Weather Index Based Crop Insurance countrywide. Agriculture Insurance as Risk mitigation tool to support farmers and other stakeholders of the agriculture sector from the risks arising from uncertain weather conditions. Weather Index Based Crop Insurance will reduce the financial instability and insecurity of the farmers and also will help them to have better access to other financial instruments and loans through which they can continue production thus helping the nation to have better economic outputs as well as can ensure food security throughout the process.

The primary objective of this endeavor is to mitigate the financial risks of the smallholder marginal farmers and other stakeholders related to the agriculture value chain from the adverse weather events, disasters and climate change effects.

Weather Index based crop insurance is a powerful tool which can stabilize the income of the small holder marginal farmer community as it provides prompt payout to the farmers which are directly connected with the weather parameters. As the drastic gradual change in climate, increased number of natural disasters and decreasing number of cultivable land are becoming a significant threat for the farmers; a risk mitigation and transfer mechanism must take place throughout the country to save the most underserved community of Bangladesh. This initiative of Green Delta visions to bring in a dramatic change in the agriculture value chain through empowering the marginal community of the country.

The main idea is to develop an innovative and disruptive solutions for the marginal farmers which will eventually result in benefiting all the relevant stakeholders of the agriculture value chain. To make this idea feasible GDIC follows a multi-stakeholder approach, common in global practices too, where each partner facilitates the initiative from their respective perspective. Data, input, feedbacks from the stakeholders and data and technological provider companies are used to design and implement customized value added insurance product which protects the investment of the farmers’ investment for a crop season.

This innovative business model works through collaboration among different stakeholders including agri value chain facilitators i.e. input sellers, contract farming, farmer hubs etc., financial facilitators i.e. MFIs, NGOs, banks, development agencies etc. besides these collaborations, GDIC also collaborates with Ministries like Ministry of Agriculture, Ministry of Finance, Financial Institution Division, BMD, BWDB etc., and data providers i.e. Skymet weather services ltd., India, International Water Management Institute, Sri Lanka for executing the whole idea smoothly.
Frist, GDIC collects the initial data related to cropping and adverse weather events directly from the farmers. Then the historical weather data is collected and sent to the actuary for identifying the index and designing the appropriate insurance product for a specific location covering a specific crop for a season. Weather data is regularly monitored for claims. And if there’s any, farmers receive the claims through the distribution partner or directly through MFSs.

GDIC has been providing Index Based Crop Insurance since 2015. Throughout the journey it has impacted 254,793 lives while the actual beneficiaries numbered 72,798 Farmers inhabiting in 19 districts of 8 divisions of the country. GDIC has covered 9 crops including cash crops and 8 perils in multiple seasons. 15,122 Farmers have received claims for adverse weather conditions including Excess & Unseasonal Rainfall, Drought, Cold Wave etc. in 4 districts of Bangladesh.
Flood Index Insurance is one of the index based products under which 4,066 households were covered for protecting their loss of income during flood including the haor area in Sunamganj, Sylhet. GDIC has provided claims to 316 boro farmers who were Amphan affected households inhabiting in haor area in 2020 as they were stricken both by the cyclone and flood afterwards. As the government has an increased concern for bringing all the farmers under insurance facility, GDIC was a proud partner in the pilot initiative started back in 2019 with insuring the haor area based farmers.

The index based crop insurance helps GDIC to achieve 4 SDG goals primarily i.e. No poverty, Zero Hunger, Industry Innovation and Infrastructure & Partnership for goals.