• The Index-Based Livestock Insurance (IBLI) innovation arose to bring the risk transfer benefits of insurance to solve a pervasive challenge:
- How to find a sustainable way to help pastoralists – the main production system in the arid lands of Kenya and the Horn of Africa - to quickly recover from the considerable livestock losses they incur during severe droughts.
• Tailored to meet the risk profile of the pastoral production system.
• IBLI agenda is uncommonly comprehensive and innovative, encapsulating elements of product development and design that required extensive engagement with pastoralists target communities; the application of novel techniques emerging at the intersection of satellite remote sensing and spatial economics to monitor livestock dynamics in pastoral systems; institutional innovations to engage regulatory and other agencies in a new concept in insurance provision and financial service delivery in a previously uninsured population; and ICT-based innovations in extension, marketing and sales for cost effective service delivery at scale.
• One of the key innovations of the IBLT product, designed to protect against drought related livestock mortality, is the use of a satellite based-date, known as Normalised Differenced Vegetation Index (NDVI). This index shown to track livestock stress and eventual mortality quite preciously offers a cheap and objective measure upon which insurance contracts can be written.
• In order to provide access to the product to pastoralists in challenging terrain, Takaful has developed a novel mode of delivery based on the concept of recruiting agents across weather divisions in order to take IBLT services closer to the pastoral communities. TIA recruits County Coordinators for each County and over 140 Agents who are responsible for creating awareness and recruiting policyholders. The Agents in collaboration with County Coordinators and IBLT Manager conduct awareness campaign and contracting during the sale period. Takaful also provides logistical support for each county.
• IBLT covers four livestock types - Camels, Cattle, Sheep and Goats. To arrive at the value of the insured herd, the four livestock will be transformed into a standard livestock unit known as a "Tropical Livestock Unit (TLU)". TLU are valued using the average livestock prices for the region. Takaful premiums are then applied to arrive at the amount one would pay for IBLT coverage for the year. Agents are also provided with phones with Apps that can automatically calculate the premium payable once fed with the livestock herd. Premiums are received through moblie money and a short message (SMS) notification generated once payment has been confirmed complete with the policy number.
• IBLT is an annual cover spanning from March to February and October to September the following year with two potential payout during the cover as long as the strike level are triggered. However, the contracts are only sold just before the rainy seasons since the rainy season may give the potential buyers information about the likely condition of the season to come that would unfairly affect their purchase decisions.
• Based on extensive publihed research carried out by ILRI, the provision of index-based livestock insurance has had the following benefits:
- During the catastrophic drought that descended on the Horn of Africa in 2011, IBLI coverage greatly enhanced household coping strategies, with insured households 36% less likely to contemplate selling otherwise productive livestock and 25% less likely to reduce meals as a way of coping with the crisis.
- Overall, across both drought and non-drought periods, insured households reported investing more in veterinary and vaccine services.
- Insured households generated higher milk productivity and incomes and had better child nutrition than non-insured households.
• Following our pilot phase in Wajir, female agents made a higher sale of policy in relation to their male counterpart. Based on this we project up to 34% of the Agents employed to be women thus creating the much needed employment opportunities for women.
• USD 247K in payouts to drought stricken communities.
• Created an additional income stream for 426 agents in the communities, 34 of whom are on monthly Net retainer of USD 200.
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