Building Farmer Resilience through Responsible Insurance Products and Practices

Agricultural index insurance has been promoted for over two decades as a key tool for strengthening smallholder farmers’ resilience to climate shocks. Despite significant investment from governments, donors, and insurers, many programs have struggled to achieve sustainable scale.

To understand why index insurance initiatives faced persistent scalability challenges, the Capstone team conducted stakeholder interviews across eighteen institutions and case-based analysis from Ethiopia, Rwanda, Zambia, Bangladesh, and Kenya. In addition to building on previous SIPA Capstone work, this project evaluated whether insurance products create real value for farmers and whether payouts occur in the years that matter most.

The team found that the primary challenge is not simply product distribution, but insufficient verification of whether products actually work for farmers at scale. Pilot programs often maintain close communication and feedback loops with farmers, but these mechanisms frequently weaken during large-scale implementation. As a result, products are often deployed without sufficient evidence that payouts align with farmers’ actual experiences of loss or that bundled insurance products meaningfully improve resilience outcomes.

Based on these findings, the team developed a practical analytical framework to support more responsible scale-up, including farmer bad-year ranking exercises, payout-alignment analysis and bundle-value assessments. It also considered how emerging technologies, including AI-supported verification systems, can strengthen monitoring and payout assessment while complementing, rather than replacing farmer-centered evaluation. The report recommended  integrating routine verification and farmer feedback mechanisms into large-scale insurance programs to improve accountability and product performance, which requires a public-private partnership to institutionalize ongoing monitoring, feedback, and course correction.