The Fiji Times » Parametric insurance – Freeing farmers from risk
Many businesses in the country face huge financial losses due to the vagaries of weather conditions, but are unable to obtain at least some financial cover for these risks.
Farmers are particularly vulnerable due to the exposure of the crops they depend on for survival and livelihood.
Farmers can do little to control or limit damage caused by adverse weather conditions since most conventional insurance products do not cover losses or account for disruption to economic activity.
Some available indemnity insurance products generally cater to affluent clients of urban residences, leaving low-income households behind. That’s why Sun Insurance believes parametric insurance meets a critical need.
The company sees this as a way to protect the country’s vital but somewhat vulnerable agricultural sector, which is farmer-driven.
The parametric insurance product provides immediate financial assistance of up to $1,000 in the event of damage caused by the cyclone.
This would mean rapid cash flow for farmers to reinvest, rebuild and recover, without having to dip into their savings or take out risky loans. It could ease the pain of a longer and more difficult recovery period.
For Sun Insurance, the parametric microinsurance product is one of the best products to come out of the United Nations Capital Development Fund’s Climate Change Insurance and Adaptation Program (PICAP).
It is an affordable and reliable insurance product for farmers, fishers and market vendors, something no one thought they could offer this particular group.
Sun Insurance believes that with the right marketing and awareness, many more low-income people will opt for insurance coverage and benefit from this product, with benefits for the national economy as a whole.
However, it is possible to further develop the product to, among other things, change some negative perceptions towards insurance.
Although the company noted incidents of negativity towards the product in its early days, consultation and outreach activities in the field have led to a change in attitude.
This not only highlights the benefits of advocacy and raising awareness, but also highlights why these efforts must be ongoing.
Sun Insurance believes that the initial negative perception was a thing of the past as farmers were now more familiar with the benefits of cover and considering insurance protection.
Outreach, education and advocacy should also include conducting a post-disaster cost-benefit analysis, as well as talking to farmers in their respective languages, as parametric insurance is relatively new to them.
According to Sun Insurance, product strengths included, but were not limited to, the ability for farmers to access funds to restart their farming business and easy cash flow to purchase food and other farm produce. first necessity.
There is no need to report claims as payment is automatically sent to the bank account within days, and there is no need to prove losses.
On the other hand, SUN Insurance noted that product weaknesses included limited trigger events for cover, inability to offer cyclonic (wind and rain) storm cover to all areas of Fiji, limited risk and a noticeably low payout figure.
Sun Insurance noted that insurance companies would not be able to offer extended coverages unless there was reinsurance backing. SUN Insurance believes that some of these early weaknesses will be corrected over time and as the product matures.
“The more the product develops and the more an adequate premium pool is created, the more attractive it will become for reinsurers, who in turn will be able to attract extended coverage. The initiative and the solution to these problems could be funded by the government.
In terms of product durability, Sun Insurance noted that the concept of insurance is all about quantity, premium pool and longevity. For an insurance product to be sustainable, it must grow and generate a pool of premiums sufficient to bear its losses over the long term.
Sun Insurance has taken ownership of PICAP’s business by integrating it into its core values strategic plan, with a proposal presented to their reinsurers to consider the product as it grows and develops from the pilot product.
Highlighting the main challenges, SUN Insurance shared this language barrier as a difficulty in reaching the masses, as well as the negative mindset of farmers about the benefits of investing in insurance.
Sun Insurance also noted that farmers who are not active members of an association or cooperative could pose a challenge to product sustainability.
On a positive note, the product also presented untapped opportunities, such as extending coverage to aquaculturists, horticulture, crafts and schools.
Sun Insurance believes that greater outreach to grassroots communities could increase subscriber numbers.
“Prompt and efficient claims service delivery will play the most important role in encouraging more members,” says Sun Insurance.
“This can be influenced by proper product outreach and field visits targeting heavily populated agricultural areas.”
Sun Insurance believes that women and disabled people’s groups involved in farming, fishing and selling in markets are another potential target group.
That the government funds insurance through social protection schemes and disability benefits, and that it caters to micro, small and medium-sized enterprises (MSMEs), is also a viable consideration, says Sun Insurance.
The company hopes its partnership with UNCDF will result in increased outreach programs in the community.
He believes that strengthening marketing efforts is key, and to this end, involving non-governmental organizations in outreach efforts could also increase the visibility of the parametric microinsurance product.