According to the Philippine Climate Change and Food Security Analysis (CCFSA) study commissioned by the World Food Program, typhoons and other extreme weather events have cost the country approximately P290 million in agricultural damages in the last decade.
Agriculture is a major industry in the Philippine economy, representing about ten percent of its gross domestic product. At the groundwork of the industry are small-scale farmers, usually holding less than three hectares of farmland, leading agricultural production. Despite being the major contributors to the industry, most of these farmers live in poverty.
With limited financial means, farmers heavily rely on loans to raise capital for their work. This situation makes them vulnerable when they lose income when crops are destroyed by floods and droughts.
“Farmer productivity has declined over the years due to insufficient support. Often, families of farmers decide to sell land for more immediate income amid pressing needs and what would have been the next generation of farmers are seen to pursue better-paying jobs,” shared Mario Berta, Country Manager for the Philippines at Igloo.
“On top of these challenges, there are recurring natural disasters that significantly hurt the livelihoods of farmers. This calls for a strengthened initiative that will mitigate the impact of catastrophes.”
While extreme weather conditions may not be prevented, preparations can be made to ensure the fastest recovery for the agriculture sector. The provision of crop insurance can help and will enable farmers to begin farming anew after a calamity.
“Crop insurance needs to be automated so the farmers can receive their payouts sooner and get back on their feet quicker,” said Berta.
Igloo is a regional insurtech firm with a mission to make insurance accessible and affordable for all through technology.
It facilitates digital insurance underwritten by partner insurance companies 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 is an innovative approach to insurance provision that pays out benefits on the basis of a rainfall level, the predetermined index, for loss of assets and investments resulting from weather and catastrophic events.
The claim is automatically paid when the rain index hits the flood or drought threshold. This eliminates the need to individually verify claims thereby reducing transaction costs, and allowing for a quicker claims settlement process.
The business rules governing claims payout being hosted on a public blockchain help leverage the attributes of transparency, consistency, and unbiasedness thereby making the setup credible.
“We believe that Weather Index Insurance is a potential product that will reduce the vulnerability of farmers to adverse weather conditions. The expected increase in the speed of claims processing will enable farmers to have a better chance of recovery from catastrophes and increase productivity and competitiveness,” added Berta.
