Important notice
Basis Risk Disclosure
Last updated: 17 July 2026
Index insurance pays when an area-level trigger is met, not when an individual farmer suffers a loss. This means your farm may experience damage while the index for your area does not trigger, or vice versa.
What is basis risk?
Basis risk is the difference between your actual loss and the payout determined by the index. It exists in every index-insurance product.
How we reduce it
We use small geographic units, combine multiple indices, validate with ground data, and clearly communicate trigger thresholds before enrolment.
Your acceptance
By enrolling you acknowledge that the product is index-based and that payout depends on the published trigger, not on an individual loss assessment.
How a payout actually works
- A maize farmer in Kitui takes KSh 25,000 of rainfall-index cover for the season.
- If the seasonal rainfall index for the farmer’s geographic unit falls below the threshold set in the policy, the trigger is met.
- Once the index is published, the payout is sent automatically to the farmer’s M-Pesa — no claim form, no assessor visit.
- Important: if the farmer’s own field is damaged but the area index does not trigger, no payout is made. That is basis risk, and it is explained before enrolment.