Satellite-based insurance is emerging as a way to help smallholder farmers get back on their feet following damaging floods or droughts. The technology remotely monitors conditions on the ground, and provides insurance companies with the information they need to verify claims. With extensive on-the-spot checks not needed, the costs can be kept within the budgets of even very poor farmers.
Now, three new policy briefs from CGIAR Research Program on Water, Land and Ecosystems (WLE), provide evidence and recommendations on how satellite-based insurance schemes can improve disaster preparedness and response, advance equity and strengthen institutions, particularly when they are incorporated in wider disaster-management plans.
“Rolling-out satellite-based index insurance across rural communities provides an opportunity to not only cushion poor farmers from climate-related risks but to do so in a way that is inclusive and helps to support effective and accountable institutions,” says Giriraj Amarnath, who leads the insurance work at the International Water Management Institute (IWMI). “This can contribute to achieving global sustainable development goals.”
Integrating insurance in disaster management
The first brief draws on IWMI’s experiences in developing an insurance product, and trialling it in India and Bangladesh; work supported by the CGIAR Research Programs on Climate Change, Agriculture and Food Security (CCAFS) and WLE, as well as the Indian Council of Agricultural Research (ICAR). IWMI scientists tested three versions of the product, including one in which insurance was bundled with flood/drought tolerant seeds and climate information, so that farmers could capitalize on receding floodwaters. A total of 1610 households received compensation and farming support as a result of the trials.
Amarnath and his co-authors call for satellite-based insurance to be incorporated into wider disaster-management plans. Specifically, they recommend that regional organizations help strengthen disaster-insurance programmes by advising governments on reforming policies and regulations around insurance; strengthening microfinance institutions to boost smallholders’ access to credit; and promoting best practice in design and policy aspects of satellite-based weather insurance.
Ensuring no one is left behind
The second brief focuses on how satellite-based flood insurance can be made accessible to more marginal households that include tenant farmers, poorer men and women, and other disadvantaged groups. The findings come from a pilot programme in Bangladesh, where weather-related crop damage threatens to undermine progress towards achieving the United Nations Sustainable Development Goals. Satellite-based insurance has the potential to help but has thus far been hampered by mistrust of insurers by farmers, weak policy support, lack of access to finance, illiteracy and gender norms.
Most farming households in rural Bangladesh rely significantly on credit to finance each cropping season. Crop losses send households spiralling into debt, which is worsened when women are unable to earn supplementary income from post-harvest farming activities. Women are often disproportionately affected during hard times, too, because of gender norms around eating; when households have to reduce food intake, men and children eat first. Women also shoulder most household responsibilities when a disaster forces men to migrate elsewhere to seek alternative income opportunities. Yet women lack influence in agriculture-related decision making.
Maximizing the benefits from insurance and ensuring the most vulnerable are not excluded, therefore, demands that initiatives respond to the heterogeneity among target communities, to reach all groups within them. This requires insurers to partner with organizations that understand rural social structures and have institutional capacity and credibility at village level, conclude the authors.
Engaging institutions to aid inclusivity
The third brief examines the institutional options for ensuring satellite-based flood insurance is socially inclusive. It examines a scheme piloted in Bihar, India’s most flood-prone state, where a multitude of agencies play active roles in disaster-risk reduction and management. The researchers identify that a weakness of the pilot insurance scheme was that it was not fully inclusive, as the team had been unable to reach farmers across all segments of the community.
Two major barriers to marginalized farmers accessing insurance are low levels of literacy and the lack of land titles they hold. Using a combination of written, visual and verbal communication can help to ensure that all farmers are aware of insurance products and understand how they can help to support their livelihoods. And where smallholders lack proof of land ownership or tenancy, local leaders or grassroots officers can step in to vouch for them.
The researchers conclude that established agencies could play an important role in scaling-up satellite-based insurance schemes. In particular, they note they could help address farmers’ distrust of crop insurance, build capacity in insurance and risk transfer, and provide support to help improve inclusivity. The authors recommend using the skills and facilities of existing institutions to enhance literacy around insurance, ensuring farmers fully understand the benefits it can deliver.
“Climate change is increasing the frequency and intensity of disasters, which is, in turn, displacing people, exacerbating conflicts and affecting efforts to reduce poverty and inequality,” says Mohamed Aheeyar, IWMI/WLE researcher and co-author of the two inclusivity briefs. “Well targeted schemes can play a major role in minimizing these risks.”
Maximizing the benefits
If implemented following the recommendations of the three briefs, insurance schemes can help enhance disaster preparedness and relief, strengthen institutions, and improve gender and income equity.
In coming years, the researchers expect strong demands from smallholder farmers and public-private investment to scale out the technology in the region