Hui Lin Chiew, Etherisc Impact BV, describes an innovative parametric insurance solution, which will be presented at the IFoA Asia Conference 2023
In the Asia-Pacific region, the International Finance Corporation (IFC) estimates that there are 450 million smallholder farmers who, together, produce more than 80% of the food consumed in the region. Yet as the recent floods in Pakistan reminded us, smallholder farmers are extremely vulnerable to the devastating effects of climate change.
There are two reasons this is a problem that needs solving.
The first is food security – risks in the agricultural value chain need to be mitigated to ensure sustainable food supply.
Second is that smallholder farmers, like anyone else, deserve to live a life of dignity and financial stability.
Today, less than 3% of smallholders worldwide have agricultural insurance. This is not just a sizeable market opportunity, but also a protection gap that needs to be closed if we are to achieve the goals above.
Why have smallholder farmers not been able to access insurance, despite decades of innovation? In many cases, insurance is still too expensive and slow. Payouts often take three–six months, which is not helpful for farmers who need prompt financial support. Many programmes rely on subsidies, which are not sustainable or predictable.
How can we make insurance better, but still a viable business? This is Etherisc’s mission.
Etherisc has developed a technology platform that automates parametric insurance from end to end, enabling faster, more cost-efficient and more transparent insurance. Parametric insurance is insurance where a claim is paid out based on a predetermined index, rather than a loss adjustment.
Etherisc’s platform connects the players in the parametric insurance value chain – the reinsurer, insurer, distribution partner, weather data source and the payment channel. It autonomously verifies whether the claim event has been triggered based on the index design and connected data source (like weather satellites), and automatically pays out to the farmer’s mobile wallet.
By doing this, we have cut costs by 80% and reduced claims payout times to a 24-hour-five-day range for 30,000 farmers in Kenya.
Going a step further, Etherisc has developed a way for farmers to become more climate-resilient while earning additional income: farmers carry out carbon farming – through agroforestry or the production of ‘biochar’ – and, in return, earn carbon credit revenues.
Considering that the voluntary carbon market is expected to grow to $50 billion USD by 2030, this is a significant opportunity for the farming sector. Part of these funds could be redirected to pay for the farmers’ agricultural insurance. Etherisc’s platform can manage and track the end-to-end transactions.
But such solutions are not possible without strong partnerships. Asia, with its vibrant fintech ecosystem, is the ideal launchpad for such a solution.
This is why the IFoA’s flagship, cross-practice event in Asia is exactly the kind of forum that is needed – where innovative ideas can be discussed in an open forum and partnerships can be built.
Don’t miss Hui Lin Chiew at the IFoA Asia Conference 2023 on 25 September, in Kuala Lumpur and streamed online. Book your place before 15 September.
