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Climate Insurance for Dry Zone Farmers in Sri Lanka
... 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). ...
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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