Parametric Crop Takaful – Where Agritech and Insurtech come together to create phenomenal value

TEXT: Salaam Takaful boasts itself as the leading Shariah-compliant insurtech, primarily because of digitized and automated processes, paperless communication, robust digital platforms, and pioneering technology-based offerings. With an objective to consistently deliver high levels of innovation while maintaining exceptional quality of service, we needed a solid technology foundation that also acts as an accelerator to leap us into the next frontier. Through induction of state-of-the-art technology infrastructure, in house developments and partnerships with leading tech-based companies, we are at the forefront of the insurtech space, and are enabled to develop tools and apps for business process optimization as well as take on new initiatives with extreme agility. We are on the cutting edge of developing the necessary smart infrastructure and lead the industry into the new era.

This also aligns with our goals of financial inclusion and the social impact that we have committed ourselves to. As a financial services company, we understand our role and position in society. We have selected this objective keeping in mind our relative strengths and the need for this initiative at large. Parametric-based Crop Takaful is one of those products to increase the financial inclusion.

Parametric-based Crop Takaful is a disruptive takaful product that does not only provide coverage based on loss, but rather defines certain parameters that become the basis of the coverage; once a parameter is triggered, its respective claim payout is automatically transferred to the policyholder.

Salaam Takaful aspires to contribute in the Agri sector by enabling farmers to be more resilient. In this respect, we are partnering and collaborating with various ecosystem players in the value chain, including but not limited to government, Agritech organizations, not for-profit organizations, banks, and financial institutions, development finance institutes, pesticide, fertilizer and seed input providers, etc. We believe that together we can create meaningful impact and build on farmers’ resilience, especially with respect to climate change.

We provide real-time satellite-based coverage to all the covered farmers, where the farmers get a payout in case of any covered weather-based perils such as excessive or shortage of rainfall, abnormal wind, high or low temperature and hailstorm. The whole essence of parametric coverage is to facilitate farmers’ ease, and we have managed to do exactly that. Our flagship Crop Parametric solutions (with advisory and index tracking built-in) can be easily embedded in or offered on a standalone basis through a variety of distribution models.

Currently, we are administering pilot projects in Rahim Yar Khan, Arifwala, Vehari, Sheikhupura, Nawabshah, Rajanpur, Bahawalnagar, Swabi, Mardan,and the list is expanding rapidly, where we have paid significant claims. Complete customization is possible as per our partners’ requirements with the added ability to offer store credit wallet for input providers.

Our journey with respect to parametric coverage that began with our induction in regulatory sandbox in 2021 is now taking a more cohesive and consistent shape with a pursuit of a sustainable business model for scaling the initiative to the national level. Our first pilot execution in Rahim Yar Khan district was the first step towards our vision. This pilot provided coverage for excess rainfall and locust attacks with instant claim resolution and a payout on a per-millimeter basis as soon as the parameter would trigger. After this pilot, we partnered with Syngenta Pakistan to take the coverage into other regions of Pakistan. We have also partnered with a few players in banking industry and are in the process of entering into a strategic alliance with other major banks of Pakistan to embed this product in their offerings. As of now we have created an ideal ecosystem, consisting of number of stakeholders, which is expanding constantly.

However, considering the fact that the local small to medium scale farmer finds it difficult to acquire products such as ours at full price, we are actively looking for donors, contributors, and value chain optimizers to allow us to distribute this coverage at a subsidized rate.

It is therefore imperative that a cohesive national level scheme be derived with the help and collaboration of multiple stakeholders in the ecosystem. Regulator and government, as far as we know, are also working and deliberating in the same line; however, a dearth of capacity, expertise, and willingness exists in the current insurance market in Pakistan – we have faith that Salaam Takaful, with its experience, can play a leading role in help shape up an inclusive, collaborative, multi-faceted index-based Islamic crop insurance scheme that is not only technology-driven and farmer-friendly but also a depiction of the desired aspirations of the farmer community. Moreover, our waqala waqf model and our history of consistent surplus distribution to our policy holders present a unique, sustainable, fair, and transparent proposition for all stakeholders.

Copyright Business Recorder, 2023