Risk is an inherent feature of agriculture around the globe. The ever-present uncertainties in weather, yields, prices, government policies, global markets, and other factors can cause high volatility in farm income. In developing countries, smallholder farmers (and other small enterprises within the value chain) often do not have access to risk management products such as insurance to protect themselves from shock. Key barriers to the development of insurance markets in developing countries include: (i) lack of awareness and understanding about insurance among households, (ii) high overhead costs associated with data collection and claims processing, and (iii) the limited availability of insurance products that meet the needs of poor and low-income farmers.
This paper from USAID looks at the use of digital tools in agricultural insurance and its potential to facilitate client uptake, reduce transaction costs, improve efficiency of the insurance process, and increase household resilience to respond to external shocks while ensuring stability, growth, and sustainability of agricultural value chains.