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Nelson Gahadza
THE Insurance and Pensions Commission (ipec) is spearheading the development of agricultural insurance to improve smallholder farmers’ access to suitable and reasonably priced cover.
Insurance plays an important role in agriculture. However, there have been few insurance products for smallholder farmers in Zimbabwe, according to the farmers’ representative bodies.
Zimbabwe — which is heavily dependent on agriculture for food production, employment creation and generation of exports — agricultural insurance could play a key role in minimising the negative impact of drought on crops and livestock. However, the insurance penetration rate in the sector remains below 2 percent.
ipec public relations manager Mr Loyd Gumbo said, while the industry regulator was spearheading the growth of agricultural insurance, it was more focused on growing the whole insurance and pensions industry through various initiatives to restore confidence in the sector.
“In this regard, the commission is also spearheading the development of agricultural insurance, which is expected to drive access to appropriate and affordable agricultural insurance for smallholder farmers,” he said in emailed responses.
ipec and the International Finance Corporation launched the agricultural index-based insurance project in 2023 to provide insurance solutions for smallholder farmers, who are vulnerable to climate-related crop losses, in Zimbabwe.
The commission has already started drafting the regulatory framework to implement the agricultural index-based insurance system.
The policy paper has since been approved by the Government through the Ministry of Finance, Economic Development and Investment Promotion.
This comes as the agriculture sector continues to face uncertainty owing to climate change, which now often brings dry weather conditions not suitable for crop production.
However, there are various factors impacting the adoption and growth of agricultural insurance, such as the unaffordability of existing products; inappropriate products; low levels of awareness of the role of insurance among farmers, especially smallholder ones; and the lack of trust between insurers and farmers.
According to Mr Gumbo, insurance providers are answering the call to adapt so that they meet consumer needs, though more still needs to be done.
“Our regulated entities are also involved in educating the public about insurance and consumers’ rights and responsibilities.
“The registration of more than 10 dedicated microinsurance entities and the introduction of microinsurance products by conventional insurers also demonstrates the sector’s commitment to close some of the identified gaps relating to accessibility and cost,” he said.
Mr Gumbo added that, as per its mandate, ipec was also entrenching fair treatment of policyholders and pension scheme members through focused market conduct supervision.
“The commission also issued directives and guidelines that protect the interests of policyholders, such as the Treating Customers Fairly Framework and the Funeral Directive,” he stated.
Speaking during the recently held Organisation for Eastern and Southern Africa Insurers 46th annual conference and annual general meeting in Victoria Falls, Risk Shield Consulting Actuary managing director Mr Agrotosh Moorkejee recommended that regulations and policies should encourage financial institutions and insurers to engage in agricultural insurance.
He said the insurers should have continued to focus on client-centric product development and pricing, taking into account risk priorities.
“There is also a need to improve access to data-weather stations, satellite-based, crop yield, livestock mortality/morbidity and market information, among others,” he said.
He further said increasing farmer-level and aggregator-level understanding of products to increase voluntary uptake and up-selling was also key to the growth of agricultural insurance in the country.
In a recent interview, Zimbabwe Farmers Union secretary-general Mr Paul Zakariya said insurance plays an important role in agriculture, but there have been minimum products for smallholder farmers.
“There is what we call area yield insurance, which is area-based, and we then say you are insuring your yield, so for whatever reason, including lack of moisture at some point, stress and so on, if you had that insurance, you would still be guaranteed the value of that produce.
“So, farmers would still get the value of the produce that they would have lost. Therefore, particularly in a year like this one (2024), considering issues like climate change and other related disasters that would include flash floods and hail storms, you are assured that if you had insured, you would be indemnified to that extent,” he said.
He noted that, in terms of uptake, there is also a need for insurers to tailor the product to suit the level and category of farmers, including smallholder ones.
Online Reporter