Etherisc – Using blockchain technology to deliver agricultural insurance
As the world’s climate continues to warm, we will inevitably see more volatile weather including heat waves, floods, droughts, and extreme weather events. These weather events can have large impacts on farmers, especially smallholder farmers in developing countries who may not have access to adequate protections. Poor weather conditions can drastically impact yields, thus resulting in food shortages and revenue shortfalls for farmers.
One way to mitigate the impacts of unpredictable weather events is through the use of agricultural insurance. Agricultural insurance helps protect farmers by insuring them against losses due to environmental causes. Despite the value of agricultural insurance as a risk management tool, only 3% of smallholder farmers in Sub-Saharan Africa use it.
There are many reasons why this number is as low as it is including expensive premiums, issues with trust, and a lack of transparency among insurance providers. It is clear that traditional insurance isn’t working for this population, and that an alternative is needed. This is where Etherisc comes in.
Etherisc is an “innovative parametric crop insurance built on top of our “Generic Insurance Framework” (GIF) on Ethereum and indexed to local weather parameters.” Etherisc makes use of Chainlink’s oracle network which provides a reliable connection to external weather data sources. In the event of an extreme weather event, insurance policies are triggered automatically and payout the insurance to the policy holder.
Simply put, the blockchain, which is built on the Ethereum network, uses smart contracts to automatically make insurance payouts during extreme weather events that are tied in to the blockchain via Chainlink’s oracle network. The end result is a fair, transparent, and tamper proof process, where payouts are made in a timely manner.
In addition to the obvious benefits that come with an objective, tamper-proof payout system, this project could also save farmers a substantial amount of money in insurance premiums. In fact, one study found that the use of this technology will reduce the costs required to issue a policy by a massive 41%, bringing down premium costs for the farmers. The end result is insurance premiums in small installments as low as 50 cents, ensuring access to those who previously couldn’t afford insurance.
This project has a lot of credibility to its name, and it is supported by both Chainlink and the Ethereum Foundation. Furthermore, they are partnering with ACRE Africa, one of the largest insurance providers for agricultural microinsurance for smallholder farmers in the region they are working. The model has also been successfully tested in Sri Lanka in 2019 with the support of Oxfam and Aon. It is clear that this project has had no problem garnering the support of several important large players, which bodes well for its future success.
Moving forward, Etherisc hopes to provide 250,000 farmers in East Africa with agricultural insurance, helping provide these farmers with an effective means to protect their livelihood in the event of extreme weather.
If this project is successful, and the team behind it is able to bring it to scale, the implications could be huge as smallholder farmers make up a huge subsection of the population in many developing countries. Furthermore, it could serve as a model for broader insurance decentralization. The use cases are endless, and this technology has the potential to disrupt a massive industry.
What do you think of the potential for this technology to disrupt the insurance industry? Tweet us at @Crypto_Altruism, we’d love to hear from you!
