Abstract:
Index insurance is a relatively new tool that farmers can use to help manage risk. It pays
out based on an index, such as rainfall, measured at a local weather station or by satellite,
rather than based on a consequence of weather, such as a farmer’s crop yield. The purpose
of this research was to identify the challenges of implementing weather index insurance in
oromia insurance company and the mechanisms in which the company uses to minimize
these challenges. The study covered micro insurance department of oromia insurance
company and two weredas from east shewa and west arsi zone of oromia regional state.
The target population of the study was the users of weather index insurance from randomly
selected kebeles . In order to get relevant data from the target population questionnaire
and interviews were used. The questionnaire was administered to the users of weathe index
insurance and the interviews were conducted with the manager/staffs of micro insurance
department of oromia insurance company. The data collected through questionnaire were
analyzed using frequency and percentage values and the qualitative data were analyzed
using textual explanations. Furthermore, the qualitative data (data from interview) were
analyzed together with the quantitative one to triangulate the results found from the
questionnaire. The findings generally indicate that lack of trust, poor compensation policy,
and lack of understanding and low willingness to buy the insurance product were the major
challenges of the company to implement and expand WII. As a result, the study presented
some possible recommendations so as to minimize the challenges. These include, providing
consecutive training programs to increase the awareness of farmers on WII, the payout
should be attractive and paid to the farmers on time, the company should be transparent
and build trust in the mind of the farmers, the government should give attention and work
in collaboration with the company to manage weather risk, and government and
international organizations should provide financial and technical assistance to the
company.
