Agric insurance brings stability to farmers

Lazarus Sauti

EVERY time climate-induced drought wrecks Zimbabwe, the media is saturated with pictures of wilting crops and dry pastures strewn with carcasses of livestock.

These pictures confirm that climate change is real and farmers are losing their crops and livestock.

Armyworms invasions, pests, and diseases are further compounding the problem for farmers, especially smallholder ones who contribute over two-thirds of the total agricultural output in the country.

Unfortunately, they are more vulnerable to climate risks since they do not have the resources to take preventive measures or absorb shocks.

“Rainfall variability, harsh weather conditions, and chronic droughts have badly affected most families here in Hwedza,” said Sarah Makoni, a smallholder farmer in Gonese, a village in Hwedza District in Mashonaland East Province of Zimbabwe.

She added that most smallholder farmers in her area, just like others in semi-arid provinces such as Manicaland, Masvingo, Mashonaland Central, Matabeleland North, and Matabeleland South, depend on rain-fed agriculture, and as such climate change is rapidly threatening sustained agricultural productivity, food security, and inclusive development.

“We have lost our livestock, thanks to climate-induced droughts. Our livestock was exposed to diseases. Though we used various indigenous knowledge techniques like sanitation, vaccination, and early treatment of diseases, we failed to handle catastrophic losses,” Makoni said, adding that the Covid-19 pandemic has worsened the food insecurity situation in her area.   

In its recently published 2020 Rural Livelihoods Assessment Report, the Zimbabwe Vulnerability Assessment Committee (ZimVac) said the economic recession and Covid-19 have also pushed more than 5 million Zimbabweans in rural areas into abject poverty.

ZimVac, in partnership with the World Food Programme (WFP), United Nations Children Fund (UNICEF), as well as Food and Agriculture Organisation (FAO) added that these people require 807 232 tonnes of grain to be food secure.

For the Joint Meeting of the Southern African Development Community (SADC) Ministers responsible for Agriculture and Food Security, Fisheries, and Aquaculture, Covid-19 and climate-induced droughts have pushed fragile member-states closer to the abyss of famine.

The Council of Ministers, therefore, urged member-states to work towards the implementation of resilience-building initiatives, improving early warning and response mechanisms, and contingency planning to lessen the impacts of human security threats such as Covid-19 and food shortages.

“SADC member-states should expand social safety nets and social protection measures for the poor and vulnerable, as well as adopt and embrace risk transfer strategies in form of agriculture insurance for crops and livestock,” said the Council of Ministers.

Launching a virtual Insurance and Pensions Journalists Mentorship 2020 Programme organised by the Insurance and Pensions Commission (IPEC) and National Social Security Authority (NSSA) recently, IPEC Commissioner, Grace Muradzikwa said agriculture insurance for crops and livestock brings stability in production by protecting farmers from the vagaries of the weather and climate.

“Agriculture insurance for crops and livestock helps to allay the impact of systemic risks by providing the much-needed protection and also contributing to the timely recovery in case a disaster strikes,” she said.

“This would help keep smallholder farmers out of poverty and enable them to invest in their future.”

Muradzikwa further said her organisation approved Prescribed Asset (PA) status – an investment in projects of national importance – towards agriculture financing worth Z$250 million this year.

“This approval is consistent with the government’s policy to increase crop and livestock production and help Zimbabwe to become an Upper Middle Income Economy by 2030,” she added.

Muradzikwa said despite the significance of insurance in stimulating inclusive development, a recent baseline survey by IPEC showed that only 34 percent of Zimbabweans have insurance of some sort, 76 percent of which are in respect of funeral insurance policies.

"The prevailing low uptake of insurance products stems from the current Covid-19 pandemic, retrenchments, company closures, high unemployment levels, hyperinflation, high levels of premium debtors, liquidity challenges, and insurance fraud," she added.

Insurance Council of Zimbabwe (ICZ) Executive Officer, Tendai Karonga said although Zimbabwe’s economy is agro-based, with agriculture contributing about 17 percent to the Gross Domestic Product (GDP) and about 60 percent of raw materials to the manufacturing industry, the low uptake of agriculture insurance for crops and livestock is exposing citizens to food shortages.

“Despite the agricultural sector being one of the major drivers of the economy, its consumption of insurance service is very minimal contributing 1.45 percent to the Gross Premium Written (GPW) for the period January to June 2020,” he said.

Karonga added that the Covid-19 pandemic, lack of insurance products that address the needs of smallholder farmers, mistrust in insurance services, and reliance on traditional self-insurance in risk and loss management are some of the factors affecting the uptake of agricultural insurance in the country.

“Thin profit margins in the sector, particularly for small-scale commercial and subsistence farmers and lack of knowledge on the benefits of insurance and risk management services, are other factors inhibiting the uptake of agricultural insurance for crops and livestock,” he added.

True to Karonga's assertions, Makoni is skeptical about insuring her crops and livestock, citing inadequate information on agriculture insurance and its importance.

"I am not aware of agriculture insurance and its importance," she told insure263.co.zw. "I think those who are involved in selling agriculture insurance are not reaching out to smallholder farmers in remote areas."

Conversely, ICZ – an independent self-governing association of short-term insurers and reinsurers in Zimbabwe duly registered by IPEC – said it is carrying out public awareness and educational campaigns on insurance products and services as one of its key activities.

“We are urging insurers to offer community-based agriculture insurances for the smallholder farmers, taking advantage of economies of scale concept,” Karonga said.

He added that IPEC, as the regulator of the insurance sector, is working on a framework to introduce weather index-based agriculture insurance aimed at boosting the uptake of agriculture insurance for crops and livestock in the country.

For agricultural extension officer, Lissom Ngwazani, agriculture insurers should increase their branch network in all farming areas to enhance the uptake of their products and services.

“Communication is key,” he said. “Agriculture insurers should invest in communication and solicit feedback from farmers on a continued basis to consistently meet customer needs and enhance service delivery.”

Ngwazani also urged agriculture insurers to collaborate with financial institutions that provide agricultural finance to boost efficiency in service delivery.

“For instance, as financial institutions assess financed agricultural projects, they can also be collecting data relevant for insurance underwriting; at the same time, insurance premiums can be paid through the banks and policies issued within bank premises. Insurers and financial institutions can thus benefit from each other’s client base,” he added.

To Information Technology (IT) expert, Mike Sakupwanya, the use of new media tools in promoting agricultural insurance has the potential to facilitate client uptake, reduce transaction costs, and improve the efficiency of the insurance process.

He, therefore, urged smallholder farmers like Makoni and others in the country to take advantage of mobile phone-based insurance products such as Moovah Crop Insurance cover and Moovah Livestock Insurance cover respectively.

Moovah Crop Insurance covers crop destruction by windstorms, uncontrollable pests, stray animals, fire, and frosts while Moovah Livestock Insurance covers livestock from death, accidental injuries, or theft.

Kenya-based insurance practitioner, David Kimwei said while Covid-19 affected the uptake of agricultural insurance in Kenya and other African states, the pandemic has made agricultural insurers to adopt online platforms to issue policies and enhance customer service delivery.

“The insurance sector in Africa, which was slow in adopting technology, embraced online platforms not only to fight the pandemic, but also to improve efficiency and enhance customer service delivery,” he said.

Kimwei continued: “The mantra was clear: adapt, embrace, and grow or remain stagnant and perish. The agricultural insurance sector in Africa adapted and embraced technology to make their services and products more accessible to new and existing customers and to build and improve insurance products and service models.”

IPEC Insurance Director, Sibongile Siwela said while Zimbabwe’s insurance sector lacks robust operational information technology (IT) systems, the insurance sector has invested in technology to flatten the Covid-19 curve, reach new markets, make insurance accessible to existing customers, and leverage cross-industry collaborations.

“Insurance companies are using digital platforms such as Facebook, Twitter, and webinars (Zoom and Microsoft teams) to fight the Covid-19 pandemic as well as to optimise costs, decrease premiums, and allow many of the uninsured to take up insurance tailored to their socio-economic and geographic circumstances,” she said.

Sharing the same sentiments, Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) Director-General, Gift Machengete added that digital technologies have ensured business continuity at a time mobility was restricted in Zimbabwe and other countries.

“Businesses embraced digital technologies for information dissemination and for forecasting. They held virtual meetings, cutting on costs associated with physical meetings,” he said.

IT specialist, George Magombeyi, however, bemoaned the low uptake of agriculture insurance in rural areas and blamed it on low internet penetration in rural and peri-urban areas in Zimbabwe.

"This low internet penetration is caused by poor Information and Communication Technology (ICT) infrastructure, connectivity issues, expensive data bundles, and digital illiteracies," he added.

Magombeyi also said IT security measures of most insurance companies in the country exclude remote systems access and this restricts access to e-platforms for all aspects of the insurance business.

He, therefore, encouraged agriculture insurers and other players in the insurance sector to be mindful of asymmetric market power, cyber-crime, online misinformation, data privacy, and platform dominance if they are to benefit from digital platforms.

Twitter: @lazarussauti @insure263