Farmers can cover the cost of seeds, fertilizers and pesticides at local agricultural supply shops by paying an extra 5 percent of their value. If their harvest fails due to bad weather they are reimbursed and can plant again.
For now, the policy only covers wheat and maize and is available for the agricultural inputs of Syngenta and two Kenyan partners supplying seeds and fertilizer not sold by the Swiss agrochemicals company. The companies in turn subsidize some of the insurance costs.
"Last year, when I took out the insurance policy, we had a total crop failure. The crop didn't even reach the flowering state, it dried up," said Jane Gathoni Simon, a maize farmer who took part in a pilot program last year.
"But at the end of the year we were compensated. I managed to get the (replacement) seeds in time and planted." Food prices rocketed in much of east Africa in 2008 and 2009 after a succession of failed rains hit staple crops such as maize. The region is now being deluged by above normal rainfall, causing widespread flooding in many areas.
On purchase, dealers use a camera phone to scan a barcode that automatically registers the policy with Kenyan insurance provider UAP over Safaricom's mobile phone network.
Confirmation of the policy is then sent to the farmer on his mobile phone via a short text message.
Safaricom, 40 percent owned by Britain's Vodafone, is the leading mobile provider in east Africa's biggest economy with nearly 15 million subscribers at the end of 2009.
The local climate is monitored by 30 solar-powered weather stations that transmit rainfall, sun radiation, temperature and wind data every 15 minutes over the mobile data network.
In the case of drought or excessive rains, registered farmers automatically receive insurance payouts through M-Pesa, Safaricom's successful mobile money transfer service.
Some 9,000 farmers have signed up for the insurance and 100 more are joining daily, said Rose Goslinga, project leader from the Sygenta Foundation for Sustainable Agriculture.
"The main problem that farmers face in the end is the weather, it's the one thing they can't control," Goslinga said.
"They can do all the things that have been taught by agronomists, but if it doesn't rain, they are lost. With these weather stations, with insurance, they get an option to do something about their fate." However, the new crop insurance known as Kilimo Salama — Swahili for safe farming — covers only variability of rain and not crop failure due to pests or disease.
James Wambugu, UAP Insurance executive director, said technology is making insurance more accessible in a country where only 6 percent of adults have any form of protection.
"By harnessing technologies like M-Pesa and weather stations, our costs are low and we are able to bring down the cost of the insurance," he said.
The ease of information transfer is largely due to Kenya's rapidly growing mobile sector which is the benchmark for the region both in terms of penetration and innovation.
"A lot of our subscribers are in very remote places, so by paying insurance premiums and payouts through the mobile phone, we cut out one to three months of travel in one or two mobile transactions," says Wadzanai Chiota, head of value-added services at Safaricom.
The Eldoret project is not the first attempt at using technology to bring insurance to rural Kenyans.
In January, the International Livestock Research Institute set up a pilot insurance program for pastoralists that uses satellite imagery to document potentially lethal losses of the grasses and shrubbery the livestock relies on.
At the moment, UAP's insurance is limited to areas that are near one of the 30 weather stations in the fertile Rift Valley.
Designers of the project are aiming for 500 stations in Kenya with hopes of reaching as many as 50,000 farmers by 2012.
But not all farmers are fully convinced.
Ezekiel Rop harvested only two bags of maize per acre in 2009 after the devastating drought, instead of the usual 15-20.
He had to sell some cows and depend on relief food to get by.
"I've heard about insurance for farmers, but I've not considered it," he said. "I want to understand it before I buy it."
