How to Address Data Gaps to Develop Better Livestock Insurance for Smallholder Farmers

Under a livestock microfinance project done in Georgia, data collected to fill the gap in mortality rate data managed to significantly decrease insurance premium prices.

Under a project owned by the International Fund for Agricultural Development (IFAD), a pilot project that provided dairy cow insurance was implemented in Georgia from 2019 to 2021.

The insurance covered smallholder dairy farmers in three regions of the country. Because of a lack of data on dairy cow mortality, the team worked with local partners to collect the data required and incorporate it into insurance product pricing.

The report published to highlight learning from the project presents key lessons on how gaps in data can be filled.

Farmers wanted all mortality risks to be covered. But insurers only offer a narrow range of risks coverage, such as accidents or wild animal attacks, unwilling to offer such coverage. This was because insurers believed mortality rates were high, but in the absence of adequate data, it was impossible to convince them otherwise.

Although one insurer was willing to lower the premium price it offers, the uptake from farmers was too low and the price was still higher than what the farmers wanted.
In order to get the prices even lower the project resorted to collecting data to identify more accurately mortality rate.

Data was collected from 500 farmers in one region in 2019. The following year, the study was repeated with 320 farmers.

Insurers assumed cow mortality rates to be 10-15% annually. But the study identified it was much lower – 1.6%. Once shared within the insurance industry, The findings resulted in a 29% price reduction.
The results had a much bigger impact than lowering the price of premiums. In addition to having an immediate impact on the pricing, the report also informed or validated other product design features such as payout amounts, eligibility criteria and potential value-added services. Furthermore, it attracted interest from different stakeholders involved in the dairy sector

The report provides tips on how to collect such livestock data:
• Ask the right questions, but keep it short
• Involve insurers before and after data collection
• Access to farmer contact databases is crucial
• Leverage the results beyond pricing, and beyond insurance
• Involve a trusted local stakeholder

There are various livestock insurance initiatives in Ethiopia. For instance, through its project, International Livestock Research Institute (ILRI) says since 2010, nearly 50,000 individual pastoralist Index-Based Livestock Insurance policies were sold in Kenya and Ethiopia together. And since 2014, more than 100,000 pastoralist households were supported through the macro-level social protection type schemes by IBLI.

Read the full report here

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