Helping Rice Farmers Cope with Natural Disaster: Weather Index Insurance

“Although we had insured our crops before, we never received a payout as we couldn’t deal with complicated forms. But we need the money, and we need a good harvest. This year, for the first time ever, we were compensated for losing our crops. The money we got helped us to buy seeds paddy for the next cultivation.” - Sivanathan Lilemalar, Farmer; Photograph: Nipuna Kumbalathara/ Oxfam

In Eastern Sri Lanka, natural disasters like floods and droughts often damage or destroy the harvests of rice farmers. For a majority of them, paddy cultivation is their only income, and this climate-sensitive crop relies on the availability of right amount of water and sunshine. In Batticaloa, every year 40% of farmers lose their crops to flood; in 2014, the damage went up to 70%. This year (2016/17), 1.2 million Sri Lankans are suffering an extreme drought, and Oxfam’s research shows that farmers communities are the worst affected. 

While the government had introduced crop insurance for rice farmers, almost no one has benefitted due to complicated procedures, bureaucracies, and inadequate resources of the Agrarian Insurance Board.

In response to the lack of risk transfer tools for farmers which makes small-holders particularly vulnerable, Oxfam in partnership with Sanasa, a private sector insurance provider, designed Weather Index Insurance (WII) as an alternative product that sidesteps the challenges.

WII is more transparent, accessible, user-friendly, and requires fewer resources as farmers insure their crops against the amount of rainfall. Rainfall levels are set for both droughts and floods, with payouts starting at the minimum threshold and increasing according to the severity. Oxfam has set up a weather station which monitors rainfall and automatically communicates in real time via SMS with the farmers, government, and the insurance provider – who triggers payments automatically. 

In 2016, Oxfam supported 500 farmers to obtain the insurance for the Yala season; Yala is one of the two rice seasons of the year and happens from May to August. Due to dry weather and lack of rain in May 2016, a payout was triggered, and each farmer received compensation of LKR. 4,400, with a total payout of LKR. 2,200,000 to all farmers.

During the Maha Season 2016/17, from October to February, in spite of some short and sharp bursts of rain, most of Batticaloa experienced an extreme drought damaging or destroying the rice fields. However, the quantity of rain was higher than the minimum threshold that would trigger a drought payout, and this meant that 622 farmers who signed for WII up wouldn’t receive compensation. Oxfam negotiated with Sanasa, the insurance provider, and as a result, the farmers are now receiving payouts with the total being LKR. 3,550,000. 

Oxfam and partners are working together to develop WII further to include complicated disaster scenarios like what happened this Maha Season and upstream rains which cause floods in low-lying areas. By reaching out to more private sector and financial sector actors, the program hopes to offer this affordable and practical coverage to more farmers.