STEP 1: Analysing
and Determining the Need for Insurance

Regardless of the product development, insurance has to be affordable, meet the particular needs of the different groups and add value. Conducting a demand or feasibility analysis helps to identify these needs. The general outline for insurance demand studies includes the following components:

  • Weather risk assessment 1: When identifying the most important weather risks, consider the results of the risk assessment (see Phase 1). If this analysis was not conducted, it has to be done at this stage. Governments will require a comprehensive overview for deciding on macro level products and should know whether these weather risks are equally relevant for producers and agricultural enterprises. Accessibility and quality of risk data are essential.
  • Priority setting for insurance products: The potential insurance customers (at all levels) need to select their priorities for insurance products. The selection builds upon the DRM gap analysis (see Phase 1.C). If this analysis was not conducted, it has to be done at this stage according to the priorities of the government (especially the MoA). Insurance demand by producers and SMEs may differ from that defined by the government and an analysis has to be done separately. Affordability of insurance products and willingness to pay by all potential customers is an essential component at this stage.
  • Supply analysis: Analyse the existing insurance products, social protection schemes and emer¬gency programmes for affected populations. The analysis of the latter is needed, as the designed or revised insurance products should not be in competition with but rather complement social protection and emergency programmes.
  • Analysis of potential delivery channels (intermediaries): Delivery channels (e.g. organizations such as farmer cooperatives, micro-finance institutions [MFIs], technology providers) are analysed by their capacity to reach potential customers (beneficiaries). This includes the trust they have established with potential insurance beneficiaries, their existing information on the insurance market, and their effectiveness and efficiency to manage insurance administration, as well as the access opportunities they can bring to other agricultural services.
  • Assessment of relevant public policies and regulation: Inclusive climate risk insurance that addresses the needs of low-income customers at the micro and meso levels is primarily delivered through non-traditional delivery channels, which are not always regulated. In many countries, index or parametric products are not categorized as insurance and require special approval from the regulator. The regulatory assessment reveals the particular conditions under which these insurance products can be sold. Other related policies such as social protection or agricultural policies for smallholders are to be assessed, for example, by their suitability for integrating market-based or subsidized products.
  • Analysis of insurance knowledge at all levels: At the macro level, governments’ assessments include knowledge on integrated DRM and the role of insurance, and familiarity with inclusive insurance. It is also important to assess the role of the insurance industry (e.g. participatory product design, new delivery channels), and regulatory challenges that may cause hindrance. At the micro level, the customers’ knowledge implies the assessment of their awareness of risk pooling and financial/insurance literacy.


The agricultural value chain actors face a number of different risks. As the publication focuses on extreme weather events and natural hazards, only those are being considered.

Guiding Questions and Tools

Guiding Questions

How to conduct a demand study or insurance needs assessment?


a2ii/Cenfri (2010): Toolkit No.1 − MicroInsurance Country Diagnositic Studies: Analytical Framework and Methodology

Guiding Questions

What are the identified gaps that cannot be managed by preventive measures, preparedness programmes and DRF products, and how can insurance cover potential damages and losses of extreme weather events for the government, the agricultural private sector and farmers?

What are the most suitable insurance products for the selected extreme weather events, considering their frequency and severity?


World Bank/A. De Janvry (2015): Quantifying Through Ex-post Assessments the Micro level Impacts of Sovereign Disaster Risk Financing and Insurance Programmes

Agricultural feasibility studies

World Bank (2013): Feasibility Study for the Design and Implementation of Cotton Index Insurance − Chaco Province, Argentina

World Bank (2013): Papua New Guinea – Agricultural Insurance Pre-Feasibility Study

Post-disaster impact assessments and post-disaster needs assessments (PDNAs) of the affected country, especially sector analysis as a part of the PDNA process.


Semi-structured interviews with the private sector including members from business associations, cooperatives and individual producers usually in the context of demand or feasibility studies − often assisted by member organizations such as NGOs, business associations or international development organizations.