why bundling can make agriculture insurance work? fileinsurance is intangible, which makes it hard...

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Why bundling can make agriculture

insurance work? Michal Matul, Mombasa, April 6

2

What is a fundamental difference between insurance and other financial services?

(…and most other things on earth)

 Insurance is intangible, which makes it hard to explain and build trust

 It is difficult to ‘test’ insurance

 This results in low demand, and undermines scale (though the business economics only works with scale)

Problem

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There are lots of bundling options

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Bundling makes insurance tangible and can improve value for all!

5

BeAer outcomes for clients: access to credit, addiDonal

services, beAer price

Insurers: trust of the market, higher scale and renewals,

lower costs

Distributors: higher customer loyalty, enhanced core

business, commissions

6

Why bundling is tricky?

 Credit and insurance are expensive so the bundle can become unaffordable

Bundling with credit… subsidized if

possible

7

 VAS provided through mobile phones as farmers received: ‒  Weather forecasts and alerts

‒  Crop market prices ‒  Claims-related updates

 But VAS need to be relevant and need to be used to have an impact

Bundling with value-added services

8

Bundling with inputs

9 34

Get farm location from SMS and monitor satellite imagery for that location

Insurance in the bag

Germination fails after 21 days without rain

Compensation sent to Farmer

via M-PesaFarmer can replant

and harvest the same season

SMS unique code to short code

Opens bag on planting, finds

card inside

→ → →

←←

New Segment for insurer: builds trustFarmers insured grew from 200 to 350k over 4 years

 Savings can be ‘tested’ by a farmer so can potenDally build trust for the enDre package

 It is hard to sustain systemaDc savings behaviours

Bundling with savings

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  PEPSICO MODEL IN INDIA: Disease free potato seeds, improved agriculture technology, disease management, SBI loans, improved transportaDon and cold-storage faciliDes, buy-back contract, weather insurance through ICICI Lombard and WRMS (late fungal disease; above 40% yield losses; trigger humidity and frost)   Results in 45% producDvity and 100% increase in farm incomes   95% penetraDon rate among contract farmers; 75% among voluntary/

not-linked-to-credit   Weather advisory messages to farmers

Bundling embedded in the value chain

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Insurer will never lead but gets scale and access to new segment

Bundling embedded in broader risk management programs

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 Bundling can make incredible difference but should be applied with care!

 Market research and pilot evaluaDon should focus as much on insurance as on the bundled services

 Start with simpler bundles before you get to complex ones

Conclusions

13

Thank you!

Contact us: matul@ilo.org

Withgeneroussupportfrom:

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