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Climate Insurance for Dry Zone Farmers in Sri Lanka

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... However, it has been reported that the level of uptake of crop insurance programs is low (CBSL 2017; Wickramasinghe 2019). The reasons for the low penetration of these conventional indemnity insurance products are: (i) lack of awareness of insurance, (ii) lack of trust in insurance providers, (iii) high transaction costs, (iv) delay in indemnity payments, and (v) lack of transparency in loss assessments (Rambukwella et al. 2007;Wickramasinghe 2019). ...
... However, the low density of weather stations and lack of quality and timely weather information was challenging given the variations in local microclimates. These variations determine the base risks in WII products (Wickramasinghe 2019). ...
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Drought is an almost annual phenomenon in Sri Lanka, occurring at varying degrees of severity and affecting many parts of the country. These droughts cause significant damage to agriculture and other economic and social activities. This paper assesses the effectiveness of satellite-based weather Index insurance (WII) bundled with real-time climate and agronomic advisory services provided to farmers’ mobile phones. The aim is to enhance the drought resilience of diverse groups of farmers by providing solutions and strategies to extend bundled insurance products to more people and address equity issues. In this pilot, an insurance product was introduced to farmers in a village in the North Central Dry Zone of Sri Lanka. WII products are seen as a part of the solution to reducing farmers’ risk to climate change. However, in many places, the structure of insurance schemes in the agriculture sector has failed to reach small-scale and marginal farmers who are most in need of risk transfer mechanisms. Based on a farmer survey, we extracted lessons from implementing a bundled insurance scheme as a pilot project to explore the utility of farmer organizations as an entry point for engaging different farmer groups and ensuring they can understand the WII insurance products and can make informed choices. The survey results show that efforts made at the outset to understand contextual issues and challenges contributed to an effective product design and rollout approach. The rollout was more effective due in part to a partnership with an established local organization while adopting an aggregator model. Covid-19 mobility restrictions prevented full implementation of the rollout. Index insurance bundled with mobile weather and agronomic advisories increased farmer resilience and reached diverse groups. Farmers emphasized that being able to assess the costs and benefits based on understanding how key elements of the product work is key to their future engagement with such products, which highlights the importance of investing in awareness raising through a blend of print, verbal and visual tools that make complex products understandable to stakeholders with low levels of literacy
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