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Igloo alleviates growing financial risk from crop failure
Innovation presentation
Index-based insurance coverage for agriculture businesses and farmers against climate risks where claims are automatically triggered by indices such as rainfall and temperature.
Weather Index Insurance protects the agriculture businesses and individual farmers against uncertain weather conditions. Claims are triggered automatically based on specific weather indices such as rainfall level, temperature, wind speed or other measurable weather-related events.
Traditionally, claims settlements for catastrophe-related losses involve tedious – and oftentimes manual – processes and subjective decision making. Parametric insurance, or index-based insurance, is an innovative approach to insurance that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses. Before the start of the insurance period, a statistical index is developed to measure deviations from the normal level of parameters such as rainfall, temperature and earthquake magnitude. This allows for claims settlement to be quicker and more objective.
Uniqueness of the project
As Igloo’s first blockchain-based parametric insurance, Weather Index Insurance automates claims through smart contracts–where claims are calculated and paid out using a predetermined value for losses and damages (e.g., rainfall level) due to adverse weather events or natural calamities.
This means that Weather Index Insurance eliminates the need for insurers to individually verify claims thus reducing transaction costs and enabling faster and easier payouts to farmers. Distributed via Igloo’s intermediary services Ignite at a premium of $8/hectare for a minimum of 0.1 hectares, Igloo has made Weather Index Insurance affordable and accessible even for small-scale farmers.
Weather Index Insurance was initially launched for paddy rice farmers in eight provinces in Vietnam with plans to reach farmers across Southeast Asia which, together, contribute to almost 30% of the world’s rice harvest. In the country, Igloo collects and monitors rainfall data from the Vietnam Meteorological and Hydrological Administration (VNMHA).
Weather Index Insurance simplifies the claims and payout process by using specific indicators (such as rainfall levels) to calculate losses from extreme weather events. The use of blockchain-based smart contracts allows Igloo to calculate premiums in real-time through pre-defined rules on the blockchain.
All in all this streamline insurance claim settlements, ensuring quicker and more dependable payouts with minimal manual involvement and reducing the typically lengthy process. This allows farmers to recover swiftly, bolstering resilience and safeguarding the agriculture sector.
