Farmers shun insurance

HARARE - Newly-resettled farmers continue to shun insurance products despite efforts by government and the corporate sector to provide cheaper programmes targeting the agriculture sector, industry experts have said.

Zimbabwe’s insurance penetration rate, which reached a high of 10 percent in the early 1990s, has been declining significantly over the last two decades with official figures showing that it dropped to a low of 1,5 percent in 2015.

Market experts attribute the decline in insurance ratio to the country’s chaotic land reform exercise that forced over 4 000 commercial farmers off the land to pave way for over 250 000 landless blacks.

Although the policy was meant to redress colonial land imbalances it resulted in significant decline in agricultural production, massive company closures and high unemployment rate.

Old Mutual Insurance’s senior business development manager Immaculate Musonza said insurance uptake among farmers took a dip when a large number of white farmers stopped agricultural production.

“The commercial farmers of yesteryear used to take agriculture as a business. They would take insurance for their crops always. But now you still find that there are many farmers who don’t take agriculture as a business and don’t insure their crops and livestock,” she said during an insurance workshop recently.

Musonza noted that most current farmers only insure their crops when they suspect that they will incur losses.

“If they think they will not incur losses, they don’t take insurance for their products. Agriculture should be taken as a business and farmers should always take insurance for their products in case something bad happens,” she added.

This comes as agriculture has become a risky enterprise due to its cyclical nature, risk of loss from drought, floods, pests and diseases, fires and natural disasters.

Research shows frequency and severity of crop failure and livestock mortality have increased over the years.

Because of the highly variable climate where any season can bring harsh conditions, farmers have been reluctant to invest in more profitable technologies and practices. This lack of investment, has led to unpredictable yields, a major factor keeping farmers trapped in poverty.

Mitigation of these risks is a priority to reducing income loss, increase agricultural productivity and enhance farmers’ well-being.

Agriculture minister Perrance Shiri recently warned farmers to take appropriate insurance cover to mitigate risks associated with harsh weather patterns.

“All farmers in Zimbabwe are responsible for the insurance of their properties against natural disasters. The prerogative lies with the individual farmer. So, some farmers are insured and others are not insured,” he said.

Insurance analyst Evelyn Ndlovu indicated that although the majority of the farmers are aware of crop insurance and its benefits, only a few understand how it works, and this limits their ability to make decisions with regard to its uptake.

“It therefore suggests that awareness on insurance necessary but not sufficient to promote crop insurance uptake. It would be prudent for insurance firms to embark on a rigorous training programme in order to provide enough information to enable farmers understand insurance clearly and thereby demystify the concept,” she said.

“This is critical since insurance provides farmers with the opportunity to use a critical mitigation measure against the ever increasing risk due to climate variability. Involving farmers in the design of the products is also crucial in improving uptake of crop insurance as this will ensure that insurance products target crops that farmers consider valuable enough to warrant an insurance cover,” Ndlovu added.

Recent innovations in the insurance market have led to development of pro-poor weather index insurance to promote affordable insurance service delivery among farmers.

Index-based insurance overcomes the obstacles to insuring smallholder farmers against weather-related risks. With index insurance, pay-outs are based on an objectively measured index that is correlated with farmers’ losses rather than actual losses.

Indexes used to represent agricultural risks include rainfall, area-average yield statistics, and vegetation conditions measured by satellites. When an index exceeds a certain threshold, farmers receive a fast, efficient payout, in some cases delivered via mobile phone. — The Financial Gazette

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