Weather Index-Based Crop Insurance

The Philippine Climate Change Adaptation Project (PhilCCAP), which was implemented in 2011 to 2016 with funding support from the World Bank and the Global Environment Facility (GEF), aimed to develop and demonstrate approaches that would enable targeted communities to adapt to the potential impacts of climate variability and change. In line with this, the project conducted various activities to demonstrate methods of adaptation to the impacts of climate change through the implementation of field-level pilot activities designed on the bases of scientific information. One specific tool developed is the Weather Index-Based Crop Insurance (WIBCI).
 
The WIBCI is an insurance scheme to cover crops against drought and excessive rainfalls during the insurance policy period. The chosen weather index is rainfall, which effectively tied the insurance payouts with incidents of drought (low rainfall) and flooding (high rainfall), both of which predominately affect agricultural activity. When there is a threshold breach, immediate payout procedures will be done to indemnify the insured farmers. WIBCI is also distinguished as payouts are issued within a reasonable period. Unlike traditional crop insurance, WIBCI awards payouts upon the breach of a certain threshold. The process begins after the issuance of a certification by PAGASA showing breach, which usually takes two (2) to five (5) days, compared to traditional crop insurance, which takes around 15 days from notice of loss to investigation and verification, until reaching settlement. No farm inspection is required in the determination of actual loss. The WIBCI allows for a more rapid transfer of indemnity, thus relieving beneficiaries of additional transaction costs in addition to the loss already sustained.
 
The WIBCI was pilot tested in Cagayan Province in Region 2 and Iloilo in Region 6. In the final cycle of the WIBCI pilot testing in Cagayan, payouts/indemnities were released to farmer beneficiaries who suffered losses due to excessive rainfall brought by Super Typhoon Lawin in 2016. A total of PhP 59,106.24 was released to 14 farmer cooperators, seven (7) days after the super typhoon damaged the province. The prompt release of payouts provided farmers the opportunity to afford new farm inputs or engage in other livelihood opportunities.