InsurTech Igloo is planning to expand its offering of weather index crop insurance products in Vietnam after a promising start with rice farmers in the country. The company is now expanding its blockchain-based parametric weather index insurance to coffee farmers and is looking to cover larger plots of land.
“Vietnam has got 1.5m hectares of land under cultivation for rice and around 700,000 for coffee. This year our plan is that we should be able to cover anywhere between 30,000 to 40,000 hectares of land,” said Igloo CEO and co-founder Raunak Mehta speaking to Asia Insurance Review. “In the first couple of seasons we covered anywhere between 8,000 to 10,000 hectares of land in the Mekong River delta,”
The InsurTech firm began trials in November 2022 with rice farmers in the country using weather index insurance which calculates claims using pre-assigned values for losses due to extreme weather hazards like heavy rainfall. Like most parametric products, the pay-outs are automatically released to beneficiaries when the rain index hits a certain threshold. This enables faster pay-outs to farmers through blockchain smart contracts without further need for verification.
“Purchasing a policy and issuing pay-outs are in fiat but policy management and claims are on the (blockchain) ledger. We are looking at more iterations of how we can make it more efficient by bringing the costs down. If you keep processing weather data, the cost goes up. If you want a decent use case of blockchain for the masses, you have to bring down the cost,” he said.
The Vietnamese market produce around 11.4m bags of coffee per year and is among the top five largest coffee producers in the world. Such crops are threatened by climate change, adverse weather conditions such as extreme drought or heavy rainfall and long-term global warming which make coffee cultivation harder and the supply scarcer.
“Coffee is a product that gets impacted by suboptimal rain when it’s either too high or too low. And that happened as recently as December of 2022, where three provinces in the central island got impacted. That impacts the farmer’s income. We have just recently come up with a coffee product building on top of the technology for weather index insurance based on rainfall - lack of rainfall, excess rainfall and provides coverage to the coffee plantations. We are working with quite a few cooperatives and agencies in Vietnam for the distribution,” said Mr. Mehta.