Igloo aims to help farmers in PH with blockchain-based insurance – Back End News
Insurtech (insurance technology) 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 the typhoon season.
Citing 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 about P290 million in agricultural damage over the past 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 in the midst of pressing needs, and what would have been the next generation of farmers seem to be pursuing better-paying jobs,” said Mario Berta, country manager for the Philippines at Igloo. “In addition to these challenges, there are recurring natural disasters that significantly damage the livelihood of farmers. This requires a strengthened initiative that will mitigate the impact of disasters.”
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Igloo hopes to help farmers prepare for the worst and ensure the fastest recovery in the event of loss of livelihood after a typhoon. Insurtech believes that the provision of crop insurance can help and will enable farmers to restart farming after a disaster.
Crop insurance
“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 arduous journey of visiting farms in the wake of typhoons and manually assessing the damage to the insured’s assets. This extended processing time contributes to further loss of income for the farmers.”
“Crop insurance needs to be automated so farmers can receive their payouts faster and get back on their feet faster,” Berta said.
Igloo facilitates digital insurance underwritten by partner insurers 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 offering that pays out benefits based on a level of rainfall, the predetermined index, for the loss of assets and investments resulting from weather and catastrophic events. The claim is paid out automatically when the rain index reaches the flood or drought threshold. This eliminates the need to verify claims individually, thereby reducing transaction costs and enabling a faster claim settlement process. The business rules that govern the payment of claims hosted on a public blockchain help leverage the properties of transparency, consistency, and impartiality, thereby making the setup credible.
“We believe that Weather Index Insurance is a potential product that will reduce farmers’ vulnerability to adverse weather conditions. The expected increase in the speed of damage management will enable farmers to have a better chance of recovering from disasters and increase productivity and competitiveness, Berta added.
However, he also acknowledged that there are challenges that need to be addressed to make blockchain-based insurance attractive to farmers. These obstacles include the country’s low insurance penetration rate, financial inclusion and access to digital services in rural areas.
“As we bring Weather Index Insurance to the Philippines, Igloo will work with organizations such as rural banks, farmer 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.
Weather Index Insurance is to be launched in more agriculturally driven countries in Southeast Asia, including the Philippines, Indonesia and Thailand. Igloo is currently talking with potential partners who can sign and distribute the product to underserved farmers in Luzon, Visayas and Mindanao.
