The insurability framework applied to agricultural microinsurance: what do we know, what can we learn?

in: The Geneva Papers on Risk and Insurance: Issues and Practice 39 (2), 264-279

Information

Agricultural microinsurance has gained increasing attention over the last years. In light of climate change, changing weather trends and more repeatedly occurring natural disasters, a wave of innovative approaches to insuring agricultural production risks, particularly index-based insurance products, have been proposed and implemented. However, the results of many of these projects were disappointing, raising the question whether microinsurance could provide viable coverage for agricultural production risks at all. This paper reviews existing theoretical and empirical research on the feasibility of agricultural microinsurance and discusses different approaches to cover agricultural productions risks. It finds that, contrary to common beliefs, many agricultural production risks, including drought, hail, floods and livestock diseases, could be effectively covered by microinsurance, although not all by index-based approaches. It makes the case for a flexible combination of different approaches to microinsurance, such as community-based and group insurance, with technological advancements such as remote-sensing techniques and index insurance.