Improving agricultural productivity and resilience with cellphone imagery to scale climate-smart crop insurance

Weather hazards such as erratic rainfall cause significant hardship for smallholder farmers in Kenya. Climate change is expected to further exacerbate farmers’ vulnerability to extreme weather. The anticipation of possible losses discourages farmers from making productivity-enhancing investments, trapping them in low-risk yet low-return agriculture. Agricultural insurance complemented with other risk-reducing practices is often cited as a sustainable approach to unlock investments in agriculture for smallholders, improving their resilience and productivity. Thus far, the number of successful insurance schemes targeting smallholders is limited, however, because of high monitoring and verification costs of traditional insurance, combined with low demand for index-based insurance—designed to eliminate the need to verify losses—mainly due to poor trust and basis risks (i.e. the imperfect correlation between farmers’ actual losses and insurance payouts). This project aims to overcome these problems through climate-smart picture-based insurance (PBI), which uses cellphone imagery to verify losses, observe management practices and promote the adoption of productivity-enhancing yet resilient technologies through bundling with stress-tolerant seeds. Ground pictures help reduce monitoring costs, minimize basis risks and create synergies with climate-smart resilience technologies. By taking pictures of insured crops, farmers engage directly in the insurance process, improving trust and tangibility. We measure the impacts of this approach by means of a cluster randomized trial in 7 counties from different regions in Kenya. We randomly assign local village entrepreneurs who provide farmers in their communities with insurance and seeds into one of three treatment arms: a) no insurance marketing efforts (control), b) marketing of the climate-smart PBI product (treatment), and c) marketing of a comparable index-based product that does not rely on smartphone pictures for claims settlement (placebo). We cross-randomize whether the village entrepreneurs provide only regular seeds, or also stress-tolerant cultivars that offer partial protection from extreme weather events.