There is a gap between what the insurance industry believes to be risk and what the farmers in the fields view as risk, according to Mr Jimmy Loro, Senior Advisor at RFPI Asia, a regional programme that supports Asian insurance supervisory authorities to enhance enabling conditions for pro-poor insurance.
Speaking at the 9th Consultative Forum on microinsurance regulation for insurance supervisory authorities and insurance practitioners yesterday, Mr Loro elaborated on a study conducted in the Philippines regarding the top risks that rice farmers experienced.
He said: “We found out that the main issue was the high price of inputs and high cost of labour,” he said. “When you look at this study, there is no mention of weather risk. Farmers weren’t looking into the risks caused by natural catastrophes due to weather.”
This represents an ongoing challenge in agriculture insurance. “We’re still not really sure what the customer needs,” said Mr Craig Thorburn, Senior Actuary of Insurance Markets and Regulation at World Bank. “Particularly when we’re talking about financial inclusion we’re approaching a new section of customers that, by definition, we don’t understand.”
He advised against “retreating” into the technical work – attempting to apply theoretical models as a form of persuasion – a habit that the industry is prone to indulge in. “No one actually thinks to talk to the customer and find out what they need,” he said. “We can’t just be agriculture insurance experts – we need to provide solutions that match the customers’ priorities.”
Citing another challenge, Ms Annette Houtekamer-van Dam, Microinsurance Expert at the Microinsurance Network, said:“Agricultural index-based insurance has shown promising developments for smallholder farmers so far. In addition to helping farmers manage day-to-day production risks, it also contributes to national disaster resilience by providing financial protection to a vulnerable community that often forms a large part of developing country populations. However, recent discussions among regional policymakers have revealed challenges in scaling up index insurance in a sustainable way.”
The half-day forum was held in Singapore by Access to Insurance Initiative, which is the implementation arm of the IAIS on inclusive insurance; the Micro Insurance Network which is an international multi-stakeholder platform for microinsurance experts; and the IAIS. The event was hosted by MAS. Its theme was “Exploring challenges in scaling up insurance as a disaster resilience strategy for smallholder farmers”.