Conventional insurance measures individual losses and makes indemnity payouts based on those losses. However, index insurance does not require measurement of individual losses and makes common payments to insured based on the level of a single index (e.g., regional yields or mortality rates) correlated with individual losses. Index insurance avoids problems that make individual insurance unprofitable for small scale agricultural. Through this principal index insurance can be used to create a safety net to alter poverty dynamics. 

This presentation is based on AMA Innovation Lab projects for the Poverty Traps Conference. This conference is a gathering point for USAID and other development assistant agencies to connect the poor to economic growth.

This presentation was presented on February 26, 2009 at Washington, DC.