Sorghum farmers in Kenya receive payout from index-based drought insurance

Here’s another great example of microinsurance in action through the use of index-based weather insurance policies for farmers in developing nations. Farmers in Kibwezi, Kenya have become the first to receive a payout from a recently launched drought insurance product sold by Jubilee Insurance.

The product launched earlier this year and provides farmers with a source of cover that pays out based on the actual weather conditions. In this case the microinsurance policy is designed to cover their crops against the risk of drought. Payments are made based on an index of rainfall, with farmers receiving a payout should rainfall drop below a predefined level. That payment increases with each millimetre drop below the trigger level. This ensures farmers can recover from both a total crop failure as well as a partial failure, guaranteeing them a return on their labour and investment.

Weather conditions in this case were recorded through a newly installed automated weather station located at a local plantation. It’s hoped that this product can be expanded to farmers in a wider area but the lack of available weather stations can hold these projects back.