Paper short abstract:

Index insurance, which in the event of crop loses pays out on the basis of a predetermined index without relying on traditional claim assessment, helps farmers manage risk. However, power relations, social dynamics and risk cultures determine those farmers likely to benefit from this insurance.

Paper long abstract:

In the developing world small-holder farmers face multiple risks that undermine their livelihood security. Vulnerability to the long-established hazards that threaten farming livelihoods is compounded by climate-related change and variability. This raises the need for new mechanisms to help farmers manage risk and improve security. Entering the picture is an insurance innovation known as 'index insurance', which in the event of loss of assets and investments pays out benefits on the basis of a predetermined index (e.g. rainfall level or area yield) without relying on the traditional and costly services of insurance claim assessors. Companies offering index insurance argue that it can both protect against climate risk and act as a mechanism to increase productivity, thus improving farmer livelihoods and reducing poverty. Many questions could be asked about the interface between organizational rationales within the insurance industry and farmers' practices, knowledge and attitudes to risk. Here we focus on one aspect, namely issues of equity - in terms of who is best able to take up opportunities for index insurance and how existing power relations, social dynamics and local risk cultures are played out within the encounter between the insurance industry and the everyday lives of small-holder farmers. We argue that for index insurance to have a realistic prospect of improving farming livelihoods, the insurance industry needs to pay more attention to the dynamic interaction between farmers' understandings of risk, the power relations that shape access to resources, and how socio-economic differences shape the distribution of development benefits.