Nairobi 16 July, 2014 - Presentation by Rahab Kariuki (ONE ACRE) at the Fin4Ag Conference.

1. Rahab Kariuki
Micro-insurance Learnings
Nairobi, July 2014

2. This is why we use index insurance: a new kind of insurance that helps farmers
cope with climate risks and does not require farm visits.
2
ACRE approaches insurance as if we were farmers
Large scale farm:
$1000 Premium
- $50 Visit Costs
+ $950, insure
vs.
Small scale farm:
$10 Premium
- $50 Visit Costs
- $40, can’t insure
One single bad season affects a farmer for years.
During one drought season, smallholder farmers can loose their entire harvest and
lack the money to buy quality farm inputs the next season.
Traditional agricultural insurance has not been able to protect them as it relies on
farm visits to assess losses.
The Challenge

3. Overview
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 Mandate: Develop and implement agricultural insurance
products for smallholder farmers
 Kilimo Salama/ ACRE started in 2009 by Syngenta
Foundation and UAP Insurance in Kenya with 185 maize
farmers
 ACRE is an insurance surveyor doing product
development, contract pricing and monitoring, client
interface
 Insured (through local insurance company, reinsurer) over
145,000 smallholder farmers in 2014 in Kenya and
Rwanda, soon to launch in Tanzania

4. Risks Faced by Micro Insurance Providers
1. Product design risk
– Too many risks all of which cannot be insured
– Do not meet consumer expectations
– Need high quality products
• Faster claim settlement
• Fewer exclusions
• Wider coverage

5. Risks Faced by Micro Insurance Providers
2. Moral hazard-
– Remoteness makes it difficult to verify
– Clients can gain a lot and lose little
3. Adverse selection-
 Individuals predisposed to risk more likely to insure
 Distorts risk pooling
5. Pricing
– Need to balance coverage, sustainability and affordability

6. Risks Faced by Micro Insurance Providers
6. Inadequacy of distribution channels
– Challenge is to minimize distribution costs
7. Income variability-
– Informal sector
– Low and unpredictable
– Should be able to pay when they have money
8. Regulatory risk

7. Business Model: a social business in the insurance sector
Primary Insurer
• Carries primary risk
• Policy documentation
• Claims Payment
ACRE
Head Quarters in Nairobi
• Product development
Local offices (Kenya, Rwanda as of 2013)
• Marketing and Distribution
• Financial education
• Data collection
Income from operating margin charged on
premium
Any profits are reinvested in the company
All regulated entities as per local insurance acts
Re-insurers
Pricing, reinsurance
Partners: Agribusiness/
Banks/ MFI’s/ NGO’s/ Mobile
Operators
• Insured on behalf of farmers
• Advance the premium
• Inform individual farmers
• Disburse compensation
Farmers
Access services including
insurance

8. Mixed Weather and Yield Insurance

9. Client-specific Communication and Registration
Are interested in the harvest
Buy the harvest
Improve farmers incomes
Mass Market
Simple product-
Germination cover
Simple explanation-
Radio jingle 21 days
no rain
Simple registration-
SMS
Contract Farmers
Tailored Product
Farmer termsheet
Registration via policy
document
Agribusiness/MFI
Tailored Product
Term sheets signed
by bank managers
Farmers insured for
loan values

10. Current Product Portfolio and Partnerships
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Crop Covered Risk Covered
Ag Package
Covered
Target
Farmer
Distribution
Partner
Maize, Beans,
Potatoes, Sorghum &
Millet
Weather and Yield
cover
Ag-Credit for Inputs &
Training
0.5 acres
Maize and Beans
Seed
Weather and Yield
cover
5-1000 acres
Coffee/ Tea Weather cover 1- 200 acres
Livestock Animal Mortality Value of animal and
Veterinary care
Owns 2-3 dairy
cows
Maize Germination of
hybrid seed
Seed Bag 1 acre = 8 bags
of seed
Wheat Weather cover Ag-Credit for input
package
+200 acres
A product developed for a 1/4 acre maize farmer in Rwanda can also serve a 1000
acre maize farmer in Kenya, allowing for our team to leverage technical design
product features.

11. In 2012 our insured farmers in Kenya invested nearly 20% more in
their farms and earned 16% more income than neighboring
uninsured farmers.

12. 12
Rahab@kilimosalama.com
www.uapkenya.com
www.syngentafoundation.org