Blockchain-Based Weather Index Insurance in Sub-Saharan Africa

Transcript

hello everyone my name is benson juguna a business transformation specialist at ac africa uh currently based in nairobi kenya and i am glad to be here and to share uh our success story on the real world application of the blockchain in offering agri insurance so i am joined today by one of my colleagues from vista risk our partners is in this project hi everyone my name is jan stockhausen i'm the chief legal architect of etherisc we're very grateful for this opportunity to present today yeah thank you anne so who let me introduce africa and ian will introduce

etherics so who are we egg africa is an innovative end-to-end detour tech company pioneering agri insurance to smallholder farmers in sub-saharan africa so with over 1.7 million policies sold we have a presence in six countries we are in fact one of the biggest agricultural micro insurance service provider in sub-saharan africa we target smallholder farmers who are vulnerable to the emerging climate changes and have limited access to agri insurance products so we distribute this parametric insurance product which we call the weather index insurance

and the brand name ecology bima pima insurance which helps the farmer to manage perils resulting from advanced weather conditions so the product pays out benefits paramedically based on predetermined index such as rainfall millimeters and under measured by weather stations or by satellite rather than based on the assessment of the actual damage do you yan easy risk has developed a decentralized digital insurance platform on the ethereum blockchain which is called the generic insurance framework or gif it allows us to digitize parametric insurance products um

[Music] and on etherisk's platform the entire life cycle of an insurance policy can be automated as software code or essentially as an insurance smart contract which dramatically reduces the operational costs of insurance and at the same time it increases the speed of transactions and the transparency for all parties involved yes thank you so what problem are we solving only three percent of smallholder farmers actually have access to agriculture insurance which is equivalent to 48 million smallholder farmers in africa and 270 million in the wild globally

yet on the other hand we see 50 percent of the global annual food production comes from smallholder farmers and many of them live in those regions most affected by climate change so improving the uptake of agriculture insurance is crucial in order to improve the food security and weather index is one of the most effective ways to increase more department resilience to climate change and that's why we are doing it unfortunately the adoption of insurance solutions lags behind many insurance solutions are still not affordable to small the farmers and there is still a little problem with trust where the insurance due to histories of delay uh mostly we've seen long delayed in

payouts of the claims from to from around three to even six months um yeah so what is our current status oh yeah our journey together has lasted for already almost two years and of course we wouldn't have not have gotten here if it weren't for the wonderful support that we've received from our loyal partners and supporters such as bhaganingan university the global innovation lab for climate finance chain link mercy corpse music adventures uh the climate ledger initiative the swiss development corporation and of course

the ethereum foundation um after those years of hard work we're pleased to report our first successful season with the first version of our live solution and 17 000 insured farmers on our platform based on our technology we were able to make payments to farmers even before the first season ended yeah definitely so we move on to the slide that explains our setup and which involves several actors as africa we create the insurance product through our actuarial department and the expertise we then distribute these products through our digital platform and our novel village based model and we also

maintain relationships with our insurers and stakeholders in the market these are the underwriters the reinsurers and the regulators then also now etherics then comes in to form the layer that maintains the back end and the platform on the blockchain weather data which we use is obtained currently from act two integrated to our solution and the payments in this platform is a payment flow down through the peso mobile money network that is currently uh very has high penetration in kenya now

the next solution so the smart contract uh we use is used to monitor the local weather at the farmer's location and it can trigger payouts as soon as the relevant thresholds are met all stages in the life cycle of the policy um of the beam assurance beam apparel insurance products are covered on the generic insurance framework from the product design stage to product distribution client onboarding premium payments contract monitoring and eventually claims payout it's all duly represented on the gif

and on the blockchain each each transition from one stage to the next is notarized on chain this creates a trustful representation of the current state of all policies on chain and the complete audit trail of all transitions of all state transitions of the product life cycle and the solution we built together is the first mvp but provides the foundation for future extension which includes digital identity management digital wallets for farmers and the creation of blockchain based risk pools managed by smart contracts we prepared a short video

that shows you how the application works in real life when a farmer signs up as the end user we also will be able to see how the transactions from our backend can be traced on the blockchain in real time using websites like block scout or ether scan the product is distributed in cooperation with farm input suppliers and financially literate experienced farmers in the communities so-called village champions when farmers buy the supplies at the start of season each bag of seeds bought from partnering ugly input suppliers will include a scratch card with a ussd code when planting the seeds the farmer can register the code using the sms ussd

function on his feature phone to provide the necessary personal and agricultural information the basic insurance premium is prepaid and included in the price of the seeds top-up payments can be made through the east african and psl payment system to increase the cover by triangulation the exact position and the time of the call will be determined to locate the farmer's field once the smart insurance contract is active it will autonomously track the weather data relevant to the farmer's policy such data is sourced from satellite weather data providers and connected weather stations in the relevant region oracles in the real time the smart contract can automatically execute the payout through an api connecting the mobile payment network as

soon as the agreed conditions for drought or flood are met as defined in the farmer's respective policy such instant payments solve an existential cash flow problem that farmers have with the delays between their claim and the insurance payout the solution has the potential to achieve premium reductions of up to 30 percent and to reduce claim cycles from three months to less than one week the payouts are done through mpisa directly to the farmers mobile phone through the system we have developed one can see the data of the farmers now we can start monitoring the contracts for each of the steps performed we have a representation on the blockchain so as the state of a policy changes with every

step this is reflected on chain so we have a complete audit trail of all changes here to show you this in more detail we see here on the left side the acre africa representation where we see the farmer's policies on the top right side we see a so-called block explorer that is an application which gives you insights to what happens on a certain blockchain for the demo we use block scout on the top bottom side we have the gif monitor which visualizes our generic insurance framework i will do these steps manually now but in the live system the whole process is automated so as soon as the farmer inputs his sms code the process is started

we can see a new block has been created and in the policy view we can see a new policy has been recorded on chain with a certain so-called business key which is used to identify the policy on chain we can see it here on the bema pima system and as well as in the gif monitor over here we can also see all the details of this transaction when it has been created there is now an application the policy has not yet been confirmed but the pharma data is in and this long sequence of numbers contains all the information which is displayed on the left side here we've created a so-called hash a hash is a compact version of all this data and as we go one step further and underwrite

the policy we can see has policy has changed to yes so there's a valid policy but of course no claim and no payout but the state change of the policy has been recorded and here on the left we see the order trade so each step has been recorded here and we could now check that this transaction is actually recorded on chain we see 0x2534 and in this block there is exactly this transaction with the key 0x2534 the next step is to claim the policy again we see new block has been mined and in the gif monitor we see one claim as soon as we execute the payout the

actual mps are payout is recorded on chain and we see here in the audit trade that this transaction has been recorded with a certain payout id now we have the complete process and all the data is recorded on chain so this data is now approvable thank you for the opportunity thank you for listening thank you for joining us today we appreciate let's change the world thanks for watching we hope this video was useful to give you a little insight into how the solution looks under the hood and once again we're very grateful for the opportunity to present today and thank you very much enjoy the rest of the conference