Enhancing Access to Agricultural Insurance in Emerging Markets
Introduction:
Pula, an insurtech company based in Kenya, has been dedicated to improving access to agricultural insurance for smallholder farmers in emerging markets since 2015. By providing coverage against pests, diseases, and extreme weather events, such as floods and droughts, Pula aims to protect farmers from potential losses. Through its efforts, Pula has already supported 15.4 million farmers in Africa, Asia, and Latin America, and with a recent $20 million series B funding round, the company plans to establish new partnerships and expand its reach further.
Expanding Partnerships and Coverage:
The series B funding was led by global investment manager BlueOrchard through its InsuResilience strategy, which focuses on providing climate insurance to vulnerable populations in emerging markets. Other participants in the funding round included the International Finance Corporation (IFC), the Bill & Melinda Gates Foundation, Hesabu Capital, and existing investors. With this new capital infusion, Pula intends to collaborate with additional partners and broaden its coverage to include livestock insurance.
Embedding Insurance in Partners’ Products:
Pula’s unique approach involves collaborating with over 100 partners, including charitable organizations, banks, governments, and agricultural input companies, to distribute insurance indirectly to farmers. Instead of selling insurance directly to farmers, Pula embeds insurance in various products and services offered by its partners. For example, insurance premiums may be incorporated into farm input costs or credit packages. This distribution model allows Pula to reach even the most remote and underserved farmers effectively.
Customized Products and Digital Actuary Platform:
To meet the specific needs of its clients and beneficiary farmers, Pula offers customized insurance products. These products are underwritten by insurance and reinsurance companies and are designed based on historical data, including weather patterns, frequency of events like floods or droughts, harvests, losses, and inputs used. Pula utilizes its digital actuary platform to develop these products and determine premiums. By leveraging data-driven insights, Pula ensures that its insurance solutions are tailored to the unique challenges faced by smallholder farmers.
Successful Collaborations and Positive Impact:
Pula’s partnerships have yielded significant results in various regions. For instance, the company has established a long-term collaboration with the Zambian government, embedding insurance premiums with fertilizer and seed packages distributed throughout the country. In Ethiopia, Pula partnered with the World Food Programme, the German Development Bank KfW, and a local insurer to provide insurance through an input voucher scheme, benefiting 122,000 farmers. Notably, Pula is about to make its largest insurance payout to date, estimated at $800,000, following an outbreak of wheat rust disease in Ethiopia’s Amhara region.
Evidence of Benefits and Overcoming Barriers:
Pula’s impact on smallholder farmers is evident through increased investment, improved yields, and higher household savings. Research conducted by Pula in African countries where insurance has been delivered shows that farmers who utilize agricultural insurance experience an average 16% increase in farm investment, a 56% improvement in yields, and up to 170% growth in household savings. Furthermore, Pula’s partner insurers have made over US$40 million in payouts to 900,000 farmers since the company’s inception. These statistics highlight the tangible benefits of agricultural insurance for emerging markets like Africa.
Renewal Rate and Future Expansion:
Pula’s success can also be seen in its high renewal rate and overall growth. Eighty percent of farmer groups and aggregators that purchase Pula-developed insurance products from partner insurers renew their policies the following year, surpassing industry averages. This high renewal rate reflects customer satisfaction with the comprehensive products offered by Pula. Building on the success of its crop insurance products, Pula plans to introduce livestock insurance in countries like Kenya. After a successful pilot program in Nigeria, where Pula offered comprehensive coverage against banditry, disease, and animal death, the company is expanding its operations in Asia and Latin America.
Conclusion:
Pula’s innovative approach to agricultural insurance has made a significant impact on smallholder farmers in emerging markets. By embedding insurance in partners’ products and customizing coverage based on data-driven insights, Pula has successfully reached millions of farmers and improved their livelihoods. The company’s partnerships with governments, organizations, and insurers have demonstrated the value of agricultural insurance in mitigating risks and fostering economic growth. With continued expansion and the introduction of livestock insurance, Pula is poised to make an even greater difference in the lives of farmers worldwide.