Crop Insurance

Crop insurance in Kenya offers essential financial protection to farmers—especially smallholders—against losses caused by drought, floods, hail, pests, diseases, and fire. Designed as a vital risk‑management tool, these insurance products help secure livelihoods, support credit access, and contribute to national food security. Yet uptake remains low, at under 1% of farmers, highlighting room for growth and innovation.

🌍 The Context & Importance of Crop Insurance

Agriculture accounts for roughly 33% of Kenya’s GDP and employs over 40% of the workforce. Smallholders are particularly vulnerable to climate shocks and pests. Between 2019 and 2022, increasing drought severity put millions at risk of food insecurity, with 5.4 million Kenyans facing acute shortages in 2022 alone United Nations | UNSGSA Queen Máxima | IFAD.

Despite the scale of risk, less than 1% of Kenyan farmers currently benefit from insurance payouts, according to the 2021 FinAccess Household Survey United Nations | UNSGSA Queen Máxima.

🧾 Types of Crop Insurance Products

1. Index-Based Insurance (IBI)

IBI triggers payouts when a measurable indicator—like rainfall, temperature, or zonal yield—crosses a threshold. This enables fast, algorithmic disbursements with minimal field verification, though it carries basis risk, meaning the index may not reflect individual farmer losses accurately Wikipedia | arXiv.

2. Area‑Yield Index Insurance (AYII)

Pioneered by Pula Advisors, AYII marries rainfall and yield data across zones. Field enumerators conduct crop sampling to validate payout triggers, reducing basis risk compared to pure index models United Nations | UNSGSA Queen Máxima | IFAD.

3. Multi-Peril Crop Insurance (MPCI)

This classical model entails field assessments by loss adjusters and compensates crop losses from defined perils (drought, pests, fire, hail). It suits larger farms but has higher administrative costs and slower payouts.

📉 Uptake & Performance—A Closer Look

The KCEP‑CRAL programme, funded by IFAD and the EU and implemented in ASAL counties (Embu, Kitui, Makueni, etc.), bundled AYII embedded with input support. About 107,000 farmers enrolled over six seasons, with 52% receiving payouts, averaging KSh 2,855 per farmer—roughly $26 USD, which was about 1.5× their premium paid Business Daily Africa | IFAD.

In 2021, payouts to 13,523 farmers in coastal Kenya totaled KSh 85.1 million, through a partnership between Pula, APA Insurance, and the Kenyan government United Nations | Business Daily Africa.

Farmers overwhelmingly recognized value: 81% would recommend bundled insurance with inputs to peers; 83–93% requested mandatory inclusion of insurance with input distribution—even in areas with low payouts.

🏛️ Leading Providers & Public-Private Collaboration

Pula Advisors

Founded in 2015 by Rose Goslinga and Thomas Njeru, Pula has disbursed coverage to over 4.3 million smallholder farmers across 22 African countries, including over two million in Kenya. Their digital pricing platform, Pula Insurance Engine (PIE), facilitates low-cost, transparent underwriting and payout processes Wikipedia | Business Daily Africa | United Nations.

APA Insurance

APA often serves as lead insurer across embedded models developed by Pula. In 2021, Pula delivered payouts together with APA to thousands of farmers in drought-affected counties Business Daily Africa.

CIC Insurance Group

A major micro‑insurance and cooperative insurer, CIC offers MPCI products for crops and livestock, tailored to smallholder and commercial farmers alike Wikipedia.

Other Players

Traditional insurers like Old Mutual / UAP, Britam, and Jubilee offer MPCI or hybrid solutions, often in collaboration with banks and cooperatives.

Government & IFAD

The Ministry of Agriculture and Livestock Development (MoALD) and IFAD’s INSURED program coordinate input‑bundled AYII insurance, public-private partnerships, and agricultural extension support in ASAL counties Reddit | IFAD.

🤝 How Step by Step Insurance Agency Partners to Deliver Value

Step By Step Insurance Agency serves as a specialized intermediary connecting farmers with top insurers like CIC, APA, Britam, and Old Mutual. Their model delivers affordability, personalized support, and fast claims assistance:

• Network of insurers: They work with insurers offering index, hybrid, and MPCI products tailored to crop type and farm scale.
• Affordable packages: Microinsurance and crop cover starting from KES 3,000 per season, suitable for smallholder budgets.
• Claims support: They assist in loss notification, documentation, and liaison with IRA or insurers to expedite settlements.
• Application support: Guidance in completing forms, providing land documentation, and planning premium payments. Premier payment channels include M‑Pesa and installments.

📝 Claims Process & Compensation Mechanics

MSP Flow:

1. Immediate notification—within 72 hours of loss via SMS, call, or agent.
2. Claim form submission, including incident details and proof.
3. Claim registration—insurer logs claim and assigns ID.
4. Loss assessment—automatic index trigger (IBI) or field adjuster visit (MPCI/AYII).
5. Adjudication—insurer confirms eligibility.
6. Payout or denial, with appeals via IRA for unresolved disputes.

Payout timelines:

• Index-based policies: 2–4 weeks
• Field‑assessed (MPCI/AYII): 4–8 weeks

Delays often stem from missing evidence or documentation disputes.

💵 Premium Structure & Subsidies

Premiums are influenced by crop type, region, number of perils, and coverage level:

• Old Mutual / UAP’s MPCI: Premiums range from 4.5–15% of the sum insured; supports early payouts to facilitate replanting.
• APA Insurance: Minimum premium of about KES 5,000, covers major perils like drought, pests, fire, and excess rain.
• Pula’s embedded AYII model: Premiums are bundled with input subsidies or loan credit; often free at point of use to the farmer, paid by suppliers/government.

Government or donor‑supported programmes (e.g. KCEP‑CRAL) frequently subsidize premiums—sometimes up to 50%, making policies more accessible to smallholders.

💡 Innovations Driving Adoption

📦 Embedded Insurance with Inputs
Bundling insurance with fertilizer or seed inputs ensures higher adoption. Farmers receiving inputs via e-vouchers or input credit automatically get insurance coverage—many reported they’d not buy inputs without insurance included.

🌐 Mobile & Digital Platforms
Solutions leveraging M‑Pesa, SMS, national IDs, and mobile apps streamline enrollment, notifications, and claims. Digital record‑keeping reduces paperwork and speeds processing.

🌍 Satellite & AI-Guided Risk Assessment
Tech-driven platforms like Pula’s PIE utilize remote sensing, satellite yield estimates, and machine learning to accurately calculate risk zones and monitor crop health, minimizing basis risk and administrative complexity.

🏛️ Public-Private Initiatives
Government programmes such as KCEP‑CRAL support embedded insurance models in target counties, often with donor backing and technical assistance.

🚧 Ongoing Challenges & Learning

• Low insurance literacy: Farmers are wary of “buying promises” and require strong trust-building outreach and extension support.
• Basis risk remains: High local variation means index thresholds don’t always reflect individual loss—field-assessed AYII helps, but limitations remain in large heterogeneous zones.
• Awareness and education gaps: Over 250–400 communications targeting other government programmes can drown messaging about insurance features—blended digital and in-person training is necessary.
• Affordability: Even with subsidies, smallholders find premiums prohibitive unless bundled with inputs.
• Claims delays: Farmers lose trust if payouts are delayed or denied without clear communication or transparent fallback options.

👩‍🌾 Farmer Impact Stories

In Kwale County, a hesitant farmer named Fatuma Rashid purchased a Pula‑enabled AYII policy (~KSh 1,200). A subsequent drought triggered a payout of KSh 85 million across the region. The payout helped pay school fees and secure food for the season. Eventual trust in the policy led others to adopt it the following year IFAD.

In Kisumu region, farmers like Onesmus and Dorcas received payouts of approx. KSh 6,000–9,000. These funds were used for school fees and investing in farm expansion—from four to six acres—rather than resorting to loans or asset sales. Both farmers became local champions promoting insurance benefits in their communities United Nations | UNSGSA Queen Máxima.

🔭 Future Directions & Opportunities

• Expand embedded insurance models—partner with more input suppliers and agri‑tech firms to bundle credit and insurance.
• Deploy more weather stations and refine zone definitions—reduce basis risk and establish hyper-local indices.
• Scale digital education channels—use M‑Pesa, extension agents, and SMS for farmer onboarding and proactive awareness.
• Strengthen regulatory oversight—IRA’s role continues in consumer protection, dispute resolution, and enhancing underwriting standards.
• Accelerate technology adoption—use satellite imagery, AI analytics, and mobile tools to improve accuracy and speed.
• Promote women & youth inclusion—data from KCEP‑CRAL show women comprised 57% of clients receiving payouts, improving financial inclusion and resilience.

✅ Summary Table of Providers & Product Features

🔎 Conclusion

Crop insurance in Kenya is a powerful tool for weathering climate shocks, protecting income, and enabling agricultural investment. Innovations such as embedded AYII programs, mobile-based enrollment, and partnerships between Pula, APA, CIC, Old Mutual, and service agencies like Step By Step are revolutionizing access.

Yet, challenges persist—insurance literacy, affordability, basis risk, and claims delays remain barriers. Continued collaboration among government agencies, insurers, fintech innovators, extension services, and local agents will be critical to scaling insurance access.

By protecting smallholder farmers, crop insurance not only supports individual resilience but also strengthens national food security and economic stability. Tools like Pula’s digital AYII products and Step By Step’s inclusive brokerage model exemplify scalable solutions for Kenya’s diverse agricultural landscape.