A randomized controlled trial (RCT) in Burkina Faso showed that farmers who purchased insurance made significantly more investments for higher future income despite implementation challenges, adding evidence for the high potential of agricultural index insurance for development.
The Global Action Network was launched with the hopes that drawing together key stakeholders and change agents could identify important gaps in knowledge or capabilities, and then innovate solutions to these problems and create resources to address them.
The Global Action Network (GAN), a collaboration between the AMA Innovation Lab and the ILO’s Impact Insurance Facility, has just released a “3-D” Client Value Assessment tool that provides a multi-dimensional measure of an insurance contract’s total value proposition for existing or potential clients.
Households have no way to tell whether an index insurance contract will leave them worse off than having no insurance at all. A Minimum Quality Standard (MQS) for index insurance would help to secure vulnerable households and to safeguard markets for future higher-quality contracts.
A resilience-based approach to social protection that includes insurance is the only sustainable way to manage poverty in the long-term. However, even this approach will fail if worst-case climate change scenarios come to pass.
The study on a hypothetical area yield index insurance contract in Ecuador found that for most farmers in the sample, the area yield index insurance would have performed equally well or much better at the same dollar-for-dollar cost compared to the existing conventional insurance contract.
The typical challenges of basis risk and low uptake have plagued index insurance products for years, but AMA Innovation Lab researchers are crafting solutions by designing innovations around the structure of the insurance contracts.
Improving index insurance products, contract design, marketing and policy can contribute to delivering on its promise of promoting independence, prosperity and resilience among these smallholder farmers.