Loyalty program with risk transfer for manufacturer of pesticides
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Background: A chemicals manufacturer in China markets its pesticides and provides information about local weather and best practice in crop care through a smartphone app. The company wanted to integrate a client loyalty programme that would allow local farmers to benefit from free-of-charge replacement for already purchased pesticides if their crops were damaged by a severe storm. This additional benefit was intended as a differentiator to induce growth in sales.
Protection buyer objectives: The manufacturer wanted to transfer its exposure to the cost of providing free replacements to the insurance market.
Risk transfer solution: The result is a parametric typhoon cover, which indemnifies for the cost of replacement agrichemicals and for damaged crops, based on wind speed severity and typhoon track within a certain geographic area. A pay-out is triggered by wind speeds exceeding a defined threshold.
Benefits: The manufacturer can increase client loyalty by offering an insurance add-on to its product which even justifies a small price increase for the product. The free-of-charge replacement feature provides farmers with financial relief when they need it most. The distribution of weather- and claims-related information through the mobile app creates additional value and differentiates the product to appeal to a modern generation of tech-savvy farmers.
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