Can technology help insurance reach more farmers? Inside the research to find out

Facilitator Catherine begins the focus group discussion in Maluwa village by introducing the concept of weather-index insurance.

Story and photos by Vicky Boult

Flying low over the farmland surrounding Malawi’s commercial capital Blantyre, it’s easy to start to get a sense of the agricultural system here. Most fields are small and planted with a mixture of crops: maize, sorghum and sunflowers seemingly most prevalent. Among the furrows, handfuls of goats, chickens and pigs rummage for food.

The views of farmland on arrival into Blantyre airport.

Agricultural livelihoods in Malawi are as tough as across much of Africa. Farmers rely on steady rain falling throughout the November-to-April wet season, though low rainfall or bad timing too often cause crop losses. The heavy dependence on crop harvests as a source of food and income means that poor rainfall threatens the well-being and financial security of farming households.

Weather-index insurance

Weather-index insurance (WII) provides a means for farmers to buffer the crop losses associated with drought. WII compensates farmers when a weather-index threshold is breached. For instance, drought insurance will provide pay-outs when cumulative rainfall remains below a given threshold.

“Insurance provides security from droughts and means that I can prepare for the future.” — Edward Bawe, member of Kalima village, Chikwawa district

However, WII can only effectively increase the resilience of farmers to extreme weather events if this threshold fairly reflects the risks for both farmers and insurers. If the threshold results in pay-outs too often, insurers will go out of business, but if pay-outs are not made often enough, farmers will suffer the effects of drought without financial support.

SatWIN-ALERT team members Thabbie and Laura meet with facilitators before a busy day of surveys.

Basis risk describes the mismatch between compensation and experienced losses. For instance, basis risk may mean a farmer experiences crop losses but does not receive a pay-out. Alternatively, a farmer may have a good year of crop growth, but gets a pay-out anyway. This mismatch is complex, resulting from interactions between the environmental situation, agricultural practices and socio-economic factors. Some amount of basis risk is inevitable, since index insurance is designed to cover a weather event that is highly correlated with loss, not the loss itself. But the more that basis risk can be minimized, the more effective agricultural WII will be.

To evaluate insurance thresholds and reduce basis risk, we can compare past insurance pay-out years with measures of drought on-the-ground. However, typical on-the-ground measures of drought, such as rain gauge and crop yield data, are often limited in Africa. Farmers can provide an alternative and valuable source of on-the-ground information as their livelihoods demand an intricate knowledge of environmental conditions.

Participants included men and women with a good knowledge of conditions in the village since 1983.

Participatory research

Participatory approaches encompass a range of techniques in which control of the research process is passed from the researcher to the subjects of the research. Information is generated by, and reflected on, by the research subjects themselves. Participatory approaches are particularly useful in understanding the views and experiences of research subjects and can be an important means of empowering communities.

The field mission utilized two participatory approaches: focus group discussions, which brought together 15–20 members of a single village to discuss their responses to a series of questions, and household surveys, in which the head of the household answered questions alone. Questions asked in both approaches were similar and aimed to gather information on the following:

Focus group participants were split into two groups to identify the nine worst drought years since 1983.

1) Agricultural practices — including information on the crop varieties planted, the cropping calendar, and the use of agricultural inputs.

2) Environmental features — including the timing of rainfall and soil types.

3) Socio-economic factors which may influence the experience of drought — including additional sources of income and expenditure, food consumption and wealth.

4) Perceptions of drought — including how drought is defined, the frequency of drought, coping mechanisms employed and disparities in impacts.

This information is vital in designing insurance products which correctly consider location-specific agricultural, environmental and socio-economic systems.

In both approaches, facilitators asked participants to identify the nine worst drought years since 1983 and rank them in order of severity. This information provides a clear basis for evaluation of WII products. When farmer-identified drought years and insurance pay-out years matched well, this suggested an insurance product in this area would have minimal basis risk.

“People are very willing to participate because they understand that insurance schemes based on their input will benefit their community in the long-run.” — Dr Thabbie Chilongo, coordinator of the Malawian field mission, Centre for Agricultural Research and Development

In group discussions, participants split into two groups to carry out this exercise, then came together to agree on and rank the worst drought years. In household surveys, the head of the household carried out this exercise alone. This is an important difference between the two participatory approaches and allows the field mission to address another important question for agricultural insurance.

There was plenty of time for discussion and for all participants to voice their thoughts.

The question of scaling

Participatory approaches in which questions are discussed in groups and a consensus reached are generally considered to provide better quality and more accurate results than surveys of individuals. However, as WII schemes are rolled-out across Africa and scaled-up from hundreds to hundreds-of-thousands of farmers, the feasibility of conducting group discussions to evaluate insurance products will diminish. Instead, insurers are likely to turn to technology to gather this information. Using mobile phones, insurers will quickly be able to gather information from individuals. But this raises questions as to the accuracy and quality of the information gathered from individuals alone.

In utilizing both group and individual approaches during the field mission in Malawi, SatWIN-ALERT will compare the results provided by each approach, and can in turn assess the reliability of future mobile phone surveys for evaluating WII.

Over three weeks, 20 facilitators visited 12 districts in Malawi. They successfully carried out focus group discussions in 72 villages and conducted 1,252 household surveys. The data will now be analyzed by the SatWIN-ALERT team and used to assess and improve WII products across Malawi.

Participants head home after the focus group discussion in Maluwa village.

SatWIN-ALERT is a NERC funded collaboration between the IRI, the University of Reading (UK) and Centre for Agricultural Research and Development, Lilongwe University of Agriculture and Natural Resources (Malawi). Working with six insurance partners, SatWIN-ALERT supports the operation of drought insurance products across Africa through addressing research gaps in weather-index insurance design and basis risk reduction. Our vision is to allow millions of farmers across sub-Saharan Africa to become more drought resistant.