Challenges of Implementing Weather Index Insurance in Oromia Insurance Company (case of Bora and Arsi negele Woreda’s)

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.