Insurtech Starts Blockchain-based Weather Index Insurance for Rice Farmers in Vietnam

Regional insurtech company Igloo, in partnership with PVI Insurance, Vietnam Meteorological and Hydrological Administration (VNMHA) and international reinsurer SCOR, announced the launch of the country’s first Weather Index Insurance – a blockchain-based parametric Index Insurance product that automates insurance claims of rice farmers.

Vietnam is among the top five rice exporters in the world, with 95% of its exports coming from the Mekong Delta region.

However, food production is challenged by severe climate conditions such as floods and shifting rainfall patterns that lead to loss of yield for paddy farmers. It is estimated that a 1% increase in insurance penetration helps reduce disaster recovery expenditure by almost 22%.

While insurance can hedge against inclement weather, it is expensive. Agri-insurance product development and distribution is impacted by low awareness amongst the farming community, challenging distribution economics and regulatory frameworks.

Considering the above challenges and the opportunity, Igloo has tried to create the most optimal value chain supported by ecosystem enablers to deliver agri-insurance at scale.

With underwriting support from PVI & SCOR, Igloo utilised blockchain technology to develop a Weather Index Insurance that automates claims through the use of smart contracts. At an affordable premium starting from US$8/hectare, with a minimum coverage area of 0.1 hectare, the product protects farmers against irregular rainfall distribution.

With rainfall data collected from VNMHA and monitored by Igloo, the parametric insurance will pay out claims calculated using pre-assigned values for losses due to weather events or natural calamities. It will also eliminate the need to individually verify claims thereby reducing transaction costs and enabling faster payouts to farmers.

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.

“The unprecedented pace of climate change coupled with Covid-19 induced supply chain shocks have made it absolutely necessary to scale up agri-insurance solutions for the smallholder farming community,” said Raunak Mehta, Co-founder and CEO at Igloo.

“Introducing the first blockchain-based Weather Index Insurance reinforces our commitment to making insurance accessible and affordable through technology. Given its high potential for scalability, we look forward to expanding this insurance solution.”

#Igloo #Blockchain

Thanks for reading ESG News Asia! Subscribe for free to receive new posts and support my work.