FREQUENTLY ASKED QUESTIONS
What is index-based insurance?
Index-based (IB) insurance, like any other insurance product, mitigates the risk of a negative event by financially compensating for a loss in exchange for a premium paid by the insured. Where it differs from traditional insurance, which assesses policy claims on a case-by-case basis, is that IB insurance offers policyholders their payout based on an external objective indicator which triggers a payment to insured clients (IBLI). This external indicator must be highly correlated to the event being insured and not be able to be manipulated. An example of this is the use of a rainfall indicator to protect against a failure in maize crops. IB insurance is largely what makes microinsurance possible, as assessing claims on a case-by-case basis is often not economically feasible for very small policies. In Zua’s case, rural farmers are the policyholders and the external indicator is rainfall levels within communities like Chibanga and Katuba.
What is mobile money?
Mobile money lets users store, send and receive money using mobile phones. It is a popular alternative to bank accounts in developing countries and can be used on both smartphones and basic phones.
Why do farmers need insurance?
A subsistence farmer’s entire livelihood depends on their crops, and the success of their crop’s harvest heavily depends on the rainfall. Rainfall is a variable that farmers have no control over, and thus insurance that protects them against the risks of drought and floods is critical.
What happens to a farmer if their crop fails and they don’t have insurance?
When subsistence farmers’ crops fail, they are left with nothing to feed their families and lack the funds needed to buy inputs for the following year’s harvest. They are often forced into piecework, which entails working on the land of a farmer who has had better success, for small amounts of food. Without piecework, the farmers and their families would starve. This, however, does not solve the problem of not being able to afford the inputs necessary for the following harvest (i.e. seeds, fertilizer, pesticide). With insurance, farmers would be compensated with most of the inputs they need for the following years harvest, putting an end to the cycle of poverty that would have been exacerbated otherwise.
How do you find and interact with the subsistence farmers you insure?
Where does my money go if there are no droughts or floods?
In cases of adequate rainfall, no insurance payouts will be made. Your donated funds will be put towards insuring a new farmer the following growing season.
Is there a risk that insured farmers will grow dependent on my donation?
No, our non-profit model is designed to support the systems that are already in place rather than impose our own. Instead of offering “band-aid” solutions, we work to address some of the fundamental long-term problems underlying rural poverty. Zua’s insurance policies are not a form of “dead-aid”, as each farmer pays a small premium (albeit a subsidized one) for the insurance, and only receives payouts when rainfall deviates from adequate and normal levels.
When does the growing season begin?
Farmers in Zambia begin preparing their fields and planting in November, and continue to care for their crops throughout the wet summer season until harvesting in April.
Are you a registered charity?
We are a registered non-profit under the Canada Not-for-profit Corporations Act, and are currently in the process of gaining full charitable status under the IRS and CRA.
Do you also provide insurance to men?
While the vast majority of our beneficiaries are females (over 90%) and our focus will always be on women (learn why here), we do not turn away small-scale male farmers who are in need of insurance. That being said, donors have the option to have their funds directed exclusively towards women if they wish.