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Blockchain Gives Crop Insurance to Farmers


A new insurance world is coming where smart contracts replace insurance documents, blockchain “oracles” supplant claim adjusters, and decentralized autonomous organizations (DAOs) take over traditional insurance carriers. Millions of poor farmers in Africa and Asia will be eligible for coverages like crop insurance too, whereas before, they were too poor and too dispersed to justify the cost of underwriting.


Subsistence farms, where families basically live off what they grow and almost nothing is left over, account for as much as two-thirds of the developing world’s three billion rural people, according to the United Nations. They almost never qualify for insurance coverage and most probably wouldn’t know what to do if it were offered. Insurance is problematic in poor nations for many reasons. It can’t be easily distributed because there are hardly any local insurance agents or brokers, and historically insurance is “sold,” not “bought.” Also, insurance claims can’t be validated without great expense because, typically, there aren’t any claims adjusters on the scene to make damage assessments. This renders underwriting un-economic.


Crop insurance is a good use case for parametric models because many of the forces that can damage crops can be objectively measured, such as rainfall, wind speeds, temperatures and others. Self-executing smart contracts also ensure that payouts for weather disasters and the like are almost immediate, noted Sid Jha, founder and CEO at Arbol — a parametric insurance provider — and this is especially important in the developing world where many farmers live hand to mouth. “You don’t have customers waiting weeks, months who in many cases can go bankrupt waiting for an insurance check,” he said, speaking at a separate Smartcon 2022 session.



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