PUTTING CLIENTS AT THE CENTER OF THE DESIGN AND SALES PROCESS DETERMINING CLIENT VALUE

Global Index Insurance Conference September 14th, 2015

Paris, France

Five key dimensions of client value in agricultural index insurance

2 |

Value for money

Value adapted in time and nature

Value through technology

Value through joining forces

Value through education

Client Value

Value for money: index insurance is an appropriate models in developing countries

3 |

Traditional insurance

Index Insurance with

subsidies

25 – 35%

Traditional insurance in developing countries

Index Insurance combined

with a meso-approach/light broker

Frictional costs

Payback to the farmer

Lower distribution costs

No claims handling costs

No adverse selection

No moral hazard

Public subsidies to foster farmers’ protection

- Higher distribution costs

- Higher claims handling costs

- Higher cost of support functions

- Distribution costs

- Claims handling costs

- Support functions

- Uncertainty loading

100%

50 – 70%

5-10%

5-10%

Value adapted in time and nature: index insurance can contribute to breaking the poverty trap cycle

4 |

Increased sensitivity to

adverse weather conditions

Poor yield/crop

destruction

No access to credit

Povertytrap

0 1 2 3 4 5 6 70

200

400

600

800

1000

1200

1400

Cost in $ by household in East Africa

Time in Months

Index insurance provides one of the most rapid payouts

* From a study in East Africa conducted by the World Bank Group

Inability to buy new entrants

Step at which insurance can break the cycle

Adapted in Time Adapted in Nature

Index insurance can contribute to breaking the poverty trap cycle

Selling of assets

Value through education: information campaigns are key

5 |

Reinsurer/ global insurer

Local insurer

Aggregator/Broker

Farmer

Levels of comprehension complexity

Development of models, technical expertise, and “geomatics”

Full understanding of model’s output and relevance to local market

Understanding of aggregated risk and capacity properly inform farmers

Clear understanding of event covered, frequency, cost and pay-out

The GIIF can intervene at every level

Value through technological progress: improvements in technology are revolutionizing the industry

6 |

First pilots with weather

stations

Data that allows for construction of

indices but with a high basis risk

MID-2000S END 2000S SINCE 2010S

Use of satellite imagery

New data available through satellite

imagery and allowing to

compensate for lack of granularity

Data science

Big Data revolution helps us design

the most appropriate

insurance products

Media

Academics

Brokers

FarmersGovernments

Value through joining forces: to tackle the food security problem, we all have a role to play

7 |

Distributors

International

Organizations

Joining forces: everyone has a role to play

Data Scientist

s

Meteorologists

Aggregators (e.g. banks, cooperatives

)

Reinsurers/

Insurers

Private Sector

Financial Institutions

Farmer’s associatio

ns

Thank you