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How the blockchain can bring weather insurance to people amid climate change

·3 min read
In this article:
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A new philanthropic effort is using blockchain technology to help insure farmers in Africa.

Lemonade Foundation, the philanthropic arm of Lemonade Insurance (LMND), is using technology from several different blockchain platforms including Avalanche, Chainlink, and DAOstack to help create a capital pool through which investors can provide funds to insure farmers.

Lemonade Foundation is funded by Lemonade, but operates independently of the parent organization. The corporation grew over 78% year-over year in 2021 and is projected to grow another 70% this year.

The Lemonade Crypto Climate Coalition seeks to provide insurance for farmers in Africa, who often must navigate volatile climate conditions that can cause supply-side nightmares. Because many countries in Africa lack advanced meteorological infrastructure required to accurately predict weather patterns.

A man pushes his bike along RN13 (National Road 13), near Ambovombe, Madagascar, February 14, 2022. Madagascar has always known extreme weather events, but scientists say these will likely increase as human-induced climate change pushes temperatures higher. Four years of drought, along with deforestation caused by people burning or cutting down trees to make charcoal or to open up land for farming, have transformed the area into a dust bowl. REUTERS/Alkis Konstantinidis       SEARCH
A man pushes his bike along RN13 (National Road 13), near Ambovombe, Madagascar, February 14, 2022. Madagascar has always known extreme weather events, but scientists say these will likely increase as human-induced climate change pushes temperatures higher. Four years of drought, along with deforestation caused by people burning or cutting down trees to make charcoal or to open up land for farming, have transformed the area into a dust bowl. REUTERS/Alkis Konstantinidis SEARCH "KONSTANTINIDIS MADAGASCAR DROUGHT" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES

This can leave farmers and people who grow their own food vastly unprepared for irregular weather circumstances such as cyclones, droughts, and intense floods. The coalition attempts to analyze data patterns using data tools from Lemonade and several other technology companies to build “highly accurate, fully automated” weather insurance models.

“[This project] brings together three passions of ours in areas that we do have domain expertise, which [are] insurance, technology, and social impact,” Lemonade Foundation Director Daniel Schreiber told Yahoo Finance Live in a recent segment. “So we're playing in an area that we think we can contribute and perhaps contribute uniquely.”

According to the Foundation’s website, the coalition seeks to address three challenges: “accurately quantifying weather risks; automating claim assessment; and providing adequate funding and reinsurance.” It is an example of a Decentralized Autonomous Organization (DAO), and is based on an ‘eco-friendly’ blockchain.

Small-scale farmers gather to collect a donation of cabbages used as feed for pigs in drought-stricken Graaff-Reinet, South Africa, November 14, 2019. Picture taken November 14, 2019. REUTERS/Mike Hutchings
Small-scale farmers gather to collect a donation of cabbages used as feed for pigs in drought-stricken Graaff-Reinet, South Africa, November 14, 2019. Picture taken November 14, 2019. REUTERS/Mike Hutchings

The Lemonade Crypto Climate Coalition is but one of a plethora of startups and nonprofits that seek to use the blockchain to address social and economic challenges around the world.

“Blockchain to date has been hugely impactful in the financial sector, but really, it's hard to point to areas in which it's been able to change things, not in the cryptic world, but actually in the material world,” Schreiber said. “On the other hand, you've got some 2 billion people on the planet who are reliant on what they grow in order to get through the year. And they are overwhelmingly not merely uninsured, but uninsurable. They have smallholder farms that simply don't make sense to traditional models to insure.”

By harnessing the distributed power of the blockchain, investors might be able to knock out two birds with one stone, Schreiber said.

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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