Part E. Case Studies

Parametric insurance for smallholder women farmers in India

Reference: ⁷⁷, Photo credit: Unsplash / Gyan Shahane

Background

Parametric insurance provides payouts based on the occurrence of a predefined event, such as rainfall levels, temperature extremes, or flood depth, rather than on assessed losses. This allows for faster, more predictable compensation to farmers or other insured groups. CelsiusPro Group (CPG) partnered with Frontier Markets, a rural social commerce platform, to help smallholder women farmers cope with climate risks. In India, smallholder women farmers represent 57% of agricultural labour and 28% of farmers. These smallholders rely on their crops for both subsistence and for income through selling to local markets. However, conventional insurance products are often unaffordable, inaccessible and ill-suited to the specific climate risks faced by women farmers, particularly in remote areas.

What was done

To address this gap, CPG structured a drought insurance product using its Water Balance Index, tailored to risks and vulnerabilities in the Indian provinces of Rajasthan and Uttar Pradesh. A survey of the target group was conducted to collect relevant exposure data, loss history data, and key insights to inform product design. Through Frontier Markets’ platform, women smallholder farmers will be able to purchase policies and receive payouts directly to their linked bank accounts. The Natural Disaster Fund (NDF), a source of reinsurance capacity for impactful parametric insurance programs in ODA-eligible countries, will have the opportunity to provide risk capacity for drought coverage.

Value creation

This example illustrates the potential of innovative parametric insurance mechanisms to strengthen the climate resilience of critical supply chains in emerging economies, particularly by targeting highly climate-vulnerable social groups. The “first mile” is strengthened in several ways:

• If smallholders suffer a loss due to heavy rainfall in the first 30-days, they can use the insurance pay-out to replant, ensuring continued food and income security.
• If smallholders suffer a loss due to drought during the growing season, they can use the pay-out as income compensation. This may help to encourage smallholders to continue farming rather than looking for alternative income sources.

Looking forward

Should parametric insurance be replicated for or expanded to transport operators, either in the first mile or further down