Igloo launches the first blockchain-based weather index insurance for rice farmers in Vietnam
Igloo launches the first blockchain-based weather index insurance for rice farmers in Vietnam
Igloo, in partnership with PVI Insurance, Vietnam Meteorological and Hydrological Administration (VNMHA), and international reinsurer SCOR, recently announced the launch of the country’s first Weather Index Insurance - a blockchain-based parametric Index Insurance product that automates insurance claims of rice farmers.
Vietnam is among the top five rice exporters in the world, with 95 percent of its exports coming from the Mekong Delta region. However, food production is challenged bysevere climateconditionssuch as floods and shifting rainfall patterns that lead to loss of yield for paddy farmers. It is estimated that a one-percent increase in insurance penetration helps reduce disaster recovery expenditure by almost 22 percent. While insurance can hedge against inclement weather, it is expensive. Agri-insurance product development and distribution are impacted by low awareness amongst the farming community, challenging distribution economics and regulatory frameworks.
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Considering the above challenges and opportunity at stake, Igloo with its end-to-end insurtech capability has tried to create the most optimal value chain supported by ecosystem enablers to deliver agri-insurance at scale. With underwriting support from PVI & SCOR, Igloo utilized blockchain technology to develop a Weather Index Insurance that automates claims through the use of smart contracts. At an affordable premium starting from 220,000 VND/hectare, with a minimum coverage area of 0.1 hectare, the product protects farmers against irregular rainfall distribution.
With rainfall data collected from VNMHA and monitored by Igloo, the parametric insurance will pay out claims calculated using pre-assigned values for losses due to weather events or natural calamities. It will also eliminate the need to individually verify claims thereby reducing transaction costs and enabling faster payouts to farmers. The business rules governing claims payout being hosted on a public blockchain help leverage the attributes of transparency, consistency and unbiasedness thereby making the setup credible.
“Our Weather Index Insurance product reduces the vulnerability of rice farmers to adverse weather conditionssuch as flood or drought,” shared Tri Nguyen, Country Manager for Vietnam at Igloo. “It allows a quicker, simpler and more objective claims settlement process and helps provide peace of mind and ease to our farmers as payouts will now be based on triggered events and publicly accessible official metrics. Having covered nearly 6,000 hectares we are targeting to cover 50,000 hectares over the next couple of seasons in collaboration with public-private enterprises”
The insurance is underwritten by PVI Insurance, Vietnam’s top General Insurance firm, and is currently distributed via Igloo’s intermediary services platform - Ignite. International reinsurer SCOR is the reinsurer partner having demonstrated a pedigree in financial and technical capacity for weather-based insurance products around the world. In the current phase, the insurance plan offers automated claims in eight provinces in the Mekong Delta region in Southern Vietnam.
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Prior to launching Weather Index Insurance, Igloo in Vietnam has successfully worked through an embedded insurance model with partners like fastest-growing one-hour-delivery e-commerce platform Loship, on-demand delivery platform AhaMove, and high-tech financial services company, LOTTE Finance. Igloo also launched Ignite by Igloo, an AI-powered platform, to enhance sellers’ productivity through a smoother and more efficient sales process.
To date, the insurtech firm has facilitated over 300 million policies across the region and aims to extend protection solutions to more underserved sectors in the region, leveraging state of the art technology. Igloo’s strong business potential lies in Southeast Asia’s growing digital economy, which is expected to hit US$300 billion in 2025. The increasing digital insurance penetration opens up new opportunities for digital players and insurance companies which are worth over US$10 billion in the region.
“The unprecedented pace of climate change coupled with COVID-19 induced supply chain shocks have made it absolutely necessary to scale up agri-insurance solutions for the smallholder farming community. Igloo is trying to bring forth an integrated approach with the wider ecosystem to strengthen farm level resilience by focusing on product and distribution innovation. Introducing the first blockchain-based Weather Index Insurance reinforces our commitment to making insurance accessible and affordable through technology,” shared Raunak Mehta, Co-founder and CEO at Igloo. “Given its high potential for scalability, we look forward to expanding this insurance solution to cover more agricultural communities and take it to other parts of Southeast Asia in the near future.”
