Regional insurance technology (insurtech) provider Igloo plans to introduce its blockchain-based parametric index insurance to coffee farmers in the Philippines.
Mario Berta, Igloo’s Country Manager for the Philippines, said similar to its first implementation to rice farmers, the Weather Index Insurance will help cover more underinsured communities and industries in the Philippines.
“Weather Index Insurance is a product that we introduced in order to protect farmers and communities across Southeast Asia from unforeseen climate hazards. While initially introduced for rice farmers, we’ve seen from its success the product’s scalability to cover other sectors like coffee farms, which is one of the robustly growing segments in the region,” he said.
The plan comes after Igloo introduced index insurance to coffee farmers in some markets in Southeast Asia, a part of what is called the coffee belt.
Southeast Asia is said to be one of the biggest coffee producers in the world.
While Vietnam and Indonesia are responsible for the majority of global coffee output, Berta said “the Philippines is also an important global producer” with industry revenue expected to reach $6.7 billion in 2023, citing data from statistics portal Statista.
The local market is also expected to grow annually by 5.69 percent until 2025.
Coffee production is not only a long-term and labor-intensive investment, but it is also one that is constantly under threat of climate hazards which provide difficult growing conditions due to extreme climate–affecting farmers and disrupting supply chains.
Berta also noted that while there are several insurance products on the market for coffee farmers, “they share a common problem of incompatibility with the real, frequent risks faced by coffee farming families.”
He added that the damage assessment process is also “complex and time-consuming, which creates the risk of additional financial hardship for farmers.”
Berta said the Weather Index Insurance eliminates the need to individually verify claims thereby reducing transaction costs and enabling faster payouts to farmers.
This is done by collecting and monitoring rainfall data to calculate claims using pre-assigned values for losses due to natural causes. The business rules governing claims payout being hosted on a public blockchain help leverage the attributes of transparency, consistency, and “unbiasedness, thereby making the setup credible.”
“The Philippines being an agricultural powerhouse and one that is at a higher risk of suffering from the impacts of climate change, is a country we believe will benefit from having Weather Index Insurance,” said Berta.
“We are currently working with our partners to make this product available in the country and other markets in the near future. In addition, we are also exploring expanding the product’s coverage to include other indices such as earthquakes.”
