Despite the high incidence of adverse weather shocks, the demand for agricultural insurance remains stubbornly low in Kenya, even among risk-averse smallholder farmers with poor access to social safety nets. Two major barriers to adoption concern are: (i) cyclical illiquidity in agriculture households and (ii) the lack of trust in insurance providers. Standard insurance contracts that provide compensation for losses as a lump sum over an uncertain time horizon post-harvest exacerbate these concerns. In this study, recent advancements in digitally-enabled loss estimation and payments infrastructure to modify contracts in a manner than can address these barriers are leveraged. The study examines whether allowing farmers greater choice in structuring compensation transfers from agricultural insurance reveals preferences for earlier and/or smaller transfers and secondly, whether farmers value an insurance product with customised compensation preferences more than a standard contract.
Authors: Cecchi, Francesco; Kannan, Samyuktha
Type: Working Paper
Year: 2025
