Utilising satellites as insurance loss adjusters could help to some of the poorest farmers in Africa. Michael Baron is watching.
Things happen, and sometimes bad things happen, like my house catching fire.
About 4000 years ago, people invented the concept of insurance, to share risks so no one lost everything when a bad thing happened. But my house catching fire is preventable – the things that are most important to insure against are the unpreventable bad things, such as extreme weather.
Farmers are hugely dependent on the weather which, let’s face it, has never been predictable. A wet summer can ruin an entire year’s harvest, so weather insurance is a big deal for farmers. If there is a bad summer for a farmer in a developed country, the loss adjuster has to come in and work out how much loss there has really been, and the insurers pay the appropriate compensation.
Things are a bit more complicated if you are a farmer in the developing world. For a start, it is much harder to get the loss adjuster to come to your farm when it is 250 miles along a dirt track from the nearest town. For most such small farmers and livestock keepers, there has until recently been no insurance to help them weather the vagaries of the weather, because there was no way for the insurers to check on actual losses.
In the absence of insurance to share the risks, such farmers tend to be very risk averse, even if that means not trying out new crops, or new breeds of cattle or sheep. Because they cannot afford to try new things, improvements in agricultural productivity happen slowly, if at all, which is very bad if we are all trying hard to boost global food security.
Look it up in the index
Recently, people like the World Bank, the UN and the World Food Programme have been looking to get around this problem by using ‘index-based insurance (PDF)‘, which harnesses the lowly weather gauge.
Many countries have hundreds of these gauges scattered around, measuring rainfall, average temperature, possibly even hours of sunlight, combined with many decades of records. It is possible to correlate this information with historic records of harvest yields and come up with an index that links recorded weather in an area to average harvests.
Farmers can then take out insurance, essentially, against the index being low. If the index goes below a certain cut off, there is a payout. As it goes lower, there is a bigger payout. The actual loss to each farmer does not have to be measured, the process is transparent, everyone is happy. This kind of insurance, only introduced in 2003, has become increasingly popular.
Eyes in the sky
So far so good, as long as you have a lot of weather stations. In large parts of Africa, the only weather stations are in the towns, where they aren’t much use in saying how the weather has been in the rural areas.
This problem, of how to create index-based agricultural insurance in countries with limited infrastructure, has been recently tackled by economists and agricultural scientists working at the International Livestock Research Institute (ILRI) in Nairobi, Kenya.
They have come up with a rather clever solution. They realised that for nearly 30 years NASA has had satellites taking pictures as they pass over Africa – pictures from which they have been deriving useful data such as the density and spread of vegetation. For poor livestock keepers, the measure of vegetation is a measure of food availability for their animals, which is a good measure of how much milk and meat they are going to have, and how well their animals are growing.
All the satellite data are freely available, so the people at ILRI used it to develop an index that related this measure of how much vegetation there was after each rainy season with sales records from the local livestock markets and came up with an index-based livestock insurance (IBLI), which they have been running in a pilot project in the arid parts of northern Kenya.
They used local people to help spread information about IBLI, and even developed games to help teach local livestock keepers about how the insurance worked. So far, the pilot has been a significant success story, and they are looking to expand the concept to other countries in the area.
It only goes to show that livestock research, and ensuring food security, isn’t only about breeding the highest yielding milk cow, or finding cures for the diseases that affect the animals (which is what I do for a living).
Some things, like the weather, can’t be cured or prevented. We just need to find ways to turn “farming insecurity” to “farming in security” – even for the farmer in the middle of nowhere.
About Michael Baron
Michael Baron has worked at the Institute for Animal Health for the last 20 years, focussing mainly on the basic biology of rinderpest and peste des petit ruminants (PPR), two important diseases of livestock affecting primarily animals in developing countries. He is currently Research Leader of the Paramyxo and Bunyavirus Group. where he is working to develop rapid pen-side diagnostics and improved vaccines for PPR, as well as studying the basic biology of the virus.