Agriculture index-based insurance excites farmers

Ipec director of insurance and micro-insurance Sibongile Siwela highlighted the enthusiasm among farmer organisations in embracing this type of insurance.

Zimbabwe’s agricultural sector has long been plagued by inadequate insurance coverage, leaving farmers vulnerable to the uncertainties and risks associated with their livelihoods.

However, a new agricultural index-based insurance is set to revolutionise the industry and bring much-needed security to the farming community.

Shadreck Makombe, president of the Zimbabwe Commercial Farmers' Union expressed his support for the initiative, emphasising the need for insurance in the agricultural sector.

"This is long overdue and like in the past, we, as the Zimbabwe Commercial Farmers Union, support the Insurance and Pensions Commission (Ipec) in their endeavours. Insurance companies themselves should be forward-looking and aggressive in marketing their products because agriculture in Zimbabwe lacks insurance," he said.

“So, given the situation, this is the best news and we support it. We also would applaud all those who have made inroads in making sure agriculture is secured and the risks are mitigated.”

Zimbabwe Farmers' Union president Abdul Nyathi echoed Makombe's sentiments, underscoring the importance of insurance for farmers.

"We do really need insurance as farmers but we would like to urge insurers to explain it to the farmers. They should explain how it will benefit the farmer, including the risks associated with it," he said.

Livestock farmer and specialist Mhlupheki Dube said insurance for agriculture is a very important component for production, which has traditionally been ignored.

“What we’ve seen from a livestock perspective is that insurers want to insure trivial issues like maybe you’re transporting your livestock from point A to X. They don't want to insure real issues that are a serious threat to farmers,” he said.

“For example, we have theileriosis which is a serious tick-borne disease decimating and almost wiping off people's herds and that is where insurance should come in to say, ‘as a farmer, we are insuring your animals on terms and conditions that will do ABCD’.

He added: “Even if the premiums are going to be a bit higher because of the risk involved, at least as a farmer you know that you are covered in the event that the disease finds itself in your area of operation. But right now, livestock farmers are not covered.

“A reckless farmer can bring the disease into your farming area and suddenly your lifetime investment is wiped out. Yet, if there was insurance, farmers can have some fall back and some can have some means of bouncing back.

“So, yes insurance is a very vital and important component in terms of any form of production and that includes crop and livestock production but the insurance companies should consider insuring very pertinent and important components of livestock production rather than having trivial coverages which really don't amount to anything of importance in the final analysis.”

The agriculture index-based insurance, spearheaded by Ipec, aims to provide comprehensive coverage for farmers based on predetermined indices such as weather patterns and crop yields.

This innovative approach to insurance will help mitigate against climate-related risks such as drought, excess rains and cyclones.

The payout is based on a pre-determined index and not on actual loss suffered. The good examples are area yield and weather index insurance.

On area yield index insurance, payout based on realised average yield of a unit area of insurance such as province, ecological zone or district deemed to have similar average yields across its breadth. Weather index insurance uses weather parameters such as rainfall as an index to determine payouts.

According to the World Food Programme (WFP), at least 70% of the population in the country depends on rain-fed agriculture with the majority of farmers having minimal productivity.

The 2022 Zimbabwe Vulnerability Assessment (Zimvac) report projected 3,8 million rural individuals to be food insecure at the height of the 2022/23 lean season (period between planting and harvesting) in Zimbabwe.

This figure represents approximately a 9,8% change from the five-year average, and a 29,8% increase from the 2021/22 consumption year.

This is mainly a result of a high shock exposure index, with many households reporting to have been exposed to several shocks that include drought, intra-seasonal dry spells, floods, water logging, crop and livestock diseases.

The intra-seasonal dry spell experienced in February to March of 2022, had devastating impacts on agricultural production, especially in the non-surplus producing areas of Zimbabwe, the report notes.

It is against this background that Ipec is spearheading the introduction of index insurance to cushion farmers against the effects of climate change.

Ipec director of insurance and micro-insurance Sibongile Siwela highlighted the enthusiasm among farmer organisations in embracing this type of insurance.

“We have seen quite a lot of enthusiasm from farmer organisations that represent farmers. They are keen to embrace this type of insurance," she told Standardbusiness during the third session of the journalists mentorship programme organised by Ipec and National Social Security Authority.

Ipec had committed to develop the market so that farmers are able to take this form of insurance to protect themselves in the event that there is a climate change –related risk that has affected them.

The insurance body is working with the International Finance Corporation, which is an arm of the World Bank in its efforts to develop this product in the market.

 “This will go a long way in improving agriculture insurance, which accounts for about 3% of the industry book,” Ipec said in its 2021 report.

Siwela encouraged farmers to take up index insurance to guard against losses that may be incurred to climate change-related shocks.

This index-based insurance scheme holds immense benefits for the agricultural sector in Zimbabwe.

By providing farmers with tailored coverage based on objective indices, it offers a more efficient and transparent way to manage risks.

Moreover, it ensures that farmers can continue their operations even in the face of unforeseen challenges, safeguarding their livelihoods and the country's food security.

With the support of farmer organisations and the commitment of insurance companies, the agricultural index-based insurance is poised to transform the landscape of farming in Zimbabwe.

As the scheme gains momentum, farmers can look forward to a more secure and sustainable future, free from the fear of unexpected losses.


Related Topics