Welcome to Insurance Covered. In this episode we discuss micro insurance with Rose Goslinga, co-founder of Pula, a micro insurance company based in Kenya. We will look at why micro insurance exists and why it has become a vital source of cover for so many people in Kenya and beyond.
We start by discussing how Rose found her way to founding a micro insurance company in Africa. Rose moved from the Netherlands to Rwanda to take up a job in the ministry for agriculture and worked with a team to implement 'the green initiative' with plans to help farmers increase their crop yield in order to ensure there was enough food to feed them and the villages they belonged to. It was in this role the need for insurance was clear, when such investment into agriculture was highly dependent on their being a good amount of rainfall.
Rose goes on to explain what micro insurance is explaining that it is exactly what it sounds like, premiums are very small and the limits of indemnity are also very small " the average farm size that we deal with is maybe half an acre, our average premium, I think this last year, was $8". Rose goes on to explain that with micro insurance they offer it is essentially a form of parametric insurance. To visit every individual farm would be logistically and financially very costly (and would drive the premiums up making it unaffordable to the farmers). So instead they rely on technology and sampling in different areas to provide data on a good harvest, if there have been issues (flooding or droughts for example) and pay-outs are based on data received back.
We then go on to discuss how Pula 'sell' insurance policies to farmers. Rose explains it comes down to behavioural economics and the value proposition but forward. It is heavily built on trust. "You are now telling people, give me money first, and then if something goes wrong, you have to trust me but I will pay you compensation". One way Pula have sold policies is through credit providers or through fertiliser providers or seed providers that the farmers are using. Working with the companies providing the credit to build and work the farms almost mandating that they take insurance cover to protect them and the harvest should anything go wrong.
We then discuss how the claims side works. Rose explains the farmers don't make claims, the technology in place calculates claims based on historical data and sampling. If a harvest in a district in lower than historically measured a payment is calculated. If the areas have been affected by adverse weather a payment is automatically calculated and paid. As soon as a trigger happens a payment to the farmers is made.
Finally, we discuss the future plans for Pula. She explains last year they had 1.7 million policies in place a number they expect to grow as they expand across Africa and beyond, with Asia and Latin America being other continents to focus on.
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