Collier argues that index insurance is best suited to cover disasters which occur every 20 years or greater because severe risks lower premium costs. Below are excerpts form the interview. Q: You have done substantial research, notably with Jerry Skees on index insurance. Why do you think that index insurance needs to be designed as “disaster insurance” rather than “crop insurance”? A: We need a new frame of reference for household markets. Up to now, the consensus focus has been crop yields. Yet the effects of bad weather on household well-being are often multifaceted and poorly captured by...

Farmers know that there will be years when the crop yields are reduced, or prices will be low. Perhaps they will diversify their crops, depend on livestock, or purchase a system to irrigate their crops. All these are ways to mitigate and reduce their risks. When there is no insurance culture or trust in insurance companies -and insurance companies themselves may not have extensive experience selling agricultural insurance - there is understandably little interest to purchase crop insurance. In such cases, it is the government who is the de facto insurer because crop losses of more than 50...

BERLIN, November 27, 2014 —The Global Index Insurance Facility (GIIF), an innovative program managed by the World Bank Group, launched today the Index Insurance Forum at the Agricultural Insurance Conference in Berlin. The Index Insurance Forum will serve as a unique forum for knowledge sharing and exchange of best practices among index-insurance practitioners and industry representatives.

Is index insurance poised for a great leap forward similar to the rapid growth experienced by microfinance and credit bureaus in the 1990s? Index insurance clearly holds a lot of promise to help unlock productivity gains and protect farmers all around the world. Index insurance is for insuring farmers, MSMEs and individuals what credit scoring was for consumer and small business lending - a huge opportunity to make financial services much more widely available at lower cost by using smart analytics and data. In this sense, index insurance may be even more promising than microcredit because...