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Index insurance is a relatively new approach for providing climate risk protection to low-income farmers in developing countries. Because this insurance is implemented in data-poor environments, information constraints and uncertainty substantially affect the products. Since insurance is a tool that can be used to exchange uncertainty in the market, the level of information available directly alters prices, with insurance protection for climate risk and insurance protection for information uncertainties about climate risks both being components of the final price. Using data, methodologies, and contracts for index insurance applications in Africa, the chapter presents this concrete component of the value of information by quantifying the value of improved data in lowering insurance prices. It provides a brief overview of index insurance in developing countries and discusses the value of remote sensing in informing the index and the role of climate trends. |
