By Christine Rodrigues, Partner, Bowmans
Smallholder farmers and the broader informal workforce play a vital role in ensuring food security and economic stability in Africa. According to a study by the International Fund for Agricultural Development, smallholder agriculture takes up 75% of global farmland and provides more than 80% of the food consumed in the developing world. Similarly, the International Labour Organization has noted that around 85% of total employment in Sub-Saharan Africa is informal.
Smallholder farmers and informal workers have historically been underserved by the insurance sector. Traditional indemnity insurance has until recently been unsuitable for these sectors mainly because of high administrative costs and complex claims processing models. Digital tools are helping providers address these challenges through automation, satellite monitoring, business-to-business embedded models and the use of localised networks.
InsurTech
Insurance providers are working with banks and microfinance institutions to embed insurance products directly into the services that African smallholder farmers and informal workers already use and trust. Products are also integrated into already established platforms and designed to apply automatically across the entire group, meaning existing members don’t have to fill out extra paperwork.
These Insurtech products can also use existing apps and platforms to process payments more efficiently. For example, some claims are processed entirely via WhatsApp, with fast payments sent directly to mobile money wallets. A case in point is funeral cover. It is a legal requirement in South Africa that insurers must assess and pay out a valid claim within two business days of receiving all required documents. Using InsurTech allows insurers to be much more efficient, resulting in quicker pay out periods, often within 24 hours of being notified.
These insurance products are also being adapted to address specific community needs.
In informal sector communities, for example, hospital stays often mean losing a day’s pay. Insurance innovators like Turaco have responded by offering hospital cash benefits that provide immediate financial assistance rather than just settling medical bills. Maternity healthcare is also being prioritised, with packages that pay a cash benefit for every night a mother is hospitalised due to childbirth complications.
Beyond personal health, micro property insurance packages now offer insurance for small and medium enterprises against losses caused by fire, theft, floods and riots. Personal accident cover is also being tailored to the gig economy. For example, delivery drivers and field workers can now receive fast financial support if they have an accident.
Agritech
Alongside these personal and business products, agritech is helping smallholder farmers to manage some of the financial risks associated with farming. For example, one agritech platform uses satellite imagery, weather metrics and environmental data to compare actual yields at the end of the season to a historical average for a given zone. When yields fall below the benchmark due to drought or floods, affected farmers automatically receive payouts into their mobile money wallets. Such platforms are already in operation in Uganda, Botswana, Ethiopia, Kenya, Zambia and Mozambique.
Another agritech provider uses satellites and local weather stations to monitor rainfall and vegetation health. Its ‘picture-based insurance’ helps farmers upload photos from their phones, alongside satellite data, to verify crop damage without having to pay for on-site investigations.
For pastoralist families, livestock insurance is also being supported by satellite data to ensure faster payouts so farmers can purchase fodder and sustain their herds based on real-time satellite vegetation and rainfall tracking.
Financial inclusion
African insurance innovators are integrating insurance products into the apps and platforms already used by smallholder farmers and informal workers. Mobile wallets, phone cameras, satellite data and messaging apps are now being used to manage risk, process claims and deliver payouts without the hefty paperwork and costs associated with traditional insurance.
