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Index Insurance: Using Public Data to Benefit Small-Scale Agriculture

Author

Listed:
  • Castillo, Maria Jose
  • Boucher, Stephen
  • Carter, Michael
Abstract
This paper highlights the importance of public data for the development of more efficient and sustainable risk management schemes, such as index insurance, for smallholder agriculture. Three case studies of index insurance—catastrophic weather insurance in Mexico, satellite-based insurance for pastoralists in Kenya, and a hypothetical area-yield insurance scheme in Ecuador—are briefly analyzed in terms of the data and type of index used, the way the contract was designed and implemented (or simulated) and the impacts of the insurance on investment, nutrition and income smoothing. The increasing opportunity to use big data for improving and expanding index insurance is also addressed. The analysis suggests that the strong potential for index insurance to improve the welfare of small farmers represents a clear justification for increased government investment in the collection of the types of data that can facilitate the expansion of index insurance markets.

Suggested Citation

  • Castillo, Maria Jose & Boucher, Stephen & Carter, Michael, 2016. "Index Insurance: Using Public Data to Benefit Small-Scale Agriculture," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(A), pages 1-22, June.
    • Handle: RePEc:ags:ifaamr:240698
    DOI: 10.22004/ag.econ.240698
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    References listed on IDEAS

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    1. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
    2. Sonka, Steve, 2014. "Big Data and the Ag Sector: More than Lots of Numbers," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(1), pages 1-20, February.
    3. Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 90(2), pages 1-6.
    4. Sarah A Janzen & Michael R Carter, 2019. "After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(3), pages 651-671.
    5. Hans P. Binswanger-Mkhize, 2012. "Is There Too Much Hype about Index-based Agricultural Insurance?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(2), pages 187-200, February.
    6. Carter, Michael R. & Galarza, Francisco B. & Boucher, Steve, 2007. "Underwriting Area-based Yield Insurance to Crowd- in Credit Supply Demand," Working Papers 190918, University of California, Davis, Department of Agricultural and Resource Economics.
    7. Gunnar Breustedt & Raushan Bokusheva & Olaf Heidelbach, 2008. "Evaluating the Potential of Index Insurance Schemes to Reduce Crop Yield Risk in an Arid Region," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(2), pages 312-328, June.
    8. Carter, Michael R. & Galarza, Francisco & Boucher, Stephen, 2007. "Underwriting area-based yield insurance to crowd-in credit supply and demand," MPRA Paper 24326, University Library of Munich, Germany.
    9. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
    10. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
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    Cited by:

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    2. Martin Eling & Irina Gemmo & Danjela Guxha & Hato Schmeiser, 2024. "Big data, risk classification, and privacy in insurance markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(1), pages 75-126, March.
    3. Luxon Nhamo & James Magidi & Adolph Nyamugama & Alistair D. Clulow & Mbulisi Sibanda & Vimbayi G. P. Chimonyo & Tafadzwanashe Mabhaudhi, 2020. "Prospects of Improving Agricultural and Water Productivity through Unmanned Aerial Vehicles," Agriculture, MDPI, vol. 10(7), pages 1-18, July.
    4. Möllmann, Johannes & Buchholz, Matthias & Kölle, Wienand & Musshoff, Oliver, 2020. "Do remotely-sensed vegetation health indices explain credit risk in agricultural microfinance?," World Development, Elsevier, vol. 127(C).
    5. Anuj Singh & Michael King, 2018. "Understanding farmers’ valuation of agricultural insurance: Evidence from Vietnam," WIDER Working Paper Series 93, World Institute for Development Economic Research (UNU-WIDER).
    6. Nicolás de Roux, 2020. "Weather Variability, Credit Scores and Access to Credit: Evidence from Colombian Coffee Farmers," Documentos CEDE 17800, Universidad de los Andes, Facultad de Economía, CEDE.

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