Innovation That Matters

| Photo source Nicolas Réméné

Insurance payouts based on weather data protect farmers from drought

Financial Services

A new insurance product can pay farmers automatically in the event of drought or flooding, rather than wait until they make a claim

Spotted: Agriculture is highly vulnerable to climate changes and extreme weather events, and as global warming heats the planet, this vulnerability will get worse. Seasonal climate variability already frequently undermines farm yields, reduces food availability, and lowers income. Small-scale agricultural producers, who often feed themselves from their farms as well as others, are especially affected by unpredictable rainfall. Oko was created to help farmers deal with this uncertainty.

The startup provides low-cost crop insurance for small farmers. Oko (which is the name of an African deity who protects harvests), uses the concept of index insurance. This uses data analysis and risk calculation, rather than onsite inspections, to create cheaper and more accessible insurance.

Farmers sign up and manage their insurance using their mobile phones. They pay around $20 (around €18.60) for one season’s coverage of approximately 1.7 hectares. Oko analyses the risk to each plot and the cost of insurance using historical and weather data.

The company uses real-time satellite data and rainfall monitoring to monitor for floods and check the amount of rainfall needed for a good harvest. If there is a flood or if rainfall drops below a certain amount, a payment to the farmers is triggered automatically. Because farmers only need to sign up once to receive future payouts automatically, it reduces the chances that these smallholder farmers will fall victim to fraud and fake insurance scams every time a drought hits.

Tackling climate change is partly about building resiliency, and insurance that is affordable and easy to use is one way to do this. Springwise has also spotted other innovations aimed at building climate resilience. These include improving the biodiversity of forests with fungus, and using modular greenhouses to protect farmers from the effects of extreme weather.

Written By: Lisa Magloff



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