The Gambling question

There’s a couple of things I’ve been wondering and would love to hear what you guys think

"Conventional crop insurance is too expensive for more than 500 MILLION small farmers worldwide. " - Christopher Sheehan, founder and chief executive of US-based WorldCover

This is what the Etherisc team are trying to tackle. The automation of this process, which will reduce operating cost, AND make the product available to orders of magnitude more people at a lower cost with math-based guarantees, is a noble proposition that could potentiallyisrup that industry.

A question arouse,: how can you prevent people from “gambling” on the weather? Take someone who is not farming that goes and buys insurance that will trigger when certain temperatures or a certain amount of rainfall is reached. I read somewhere that there is a kind of chip on certain bags of seeds that will activate when opened, sending their geolocation to the smart contact, thus activating it. What if the person just buys that bag of seeds to open it and gamble on the weather? And how could one prevent non-farmers from doing that? And in any case, should you?

I’m sorry if this is to basic a question. I’m just doing my feet on Thurs industry and I’m certain this protocol can bring much benefit and protection where it is most needed. A penny for your thoughts.

the answer is twofold:
First, looking at the concrete implementation of crop insurance in e.g. Kenya, there is a lot of social control build in the system. Farmers purchase seed at an input supplier in their local town, who knows most people personally. The amount you can “win” by gambling is small in comparison to the wager (you have to buy the seed!). And why should you not increase your profit by actually growing the seed?
But in the large scale, we need of course a system with some build-in protection against gambling and fraud. Gambling is essentially unattractive because about 30-40% of the premium are used to pay operating and distribution costs. So in the average you would lose those 30-40%.
A bigger problem would be fraud, but this is prevented because this is a parametric product where payouts are triggered automatically, which is difficult to manipulate.

Does this answer your question?

Sorry for the delayed response. That makes it quite clear thanks Cristoph.