• Wednesday, February 21, 2024
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Claims needed to encourage systematic insurance purchase


Persuading farmers to buy insurance is still proving difficult across Africa, particularly in years when there are no claims.

Insurers at the International Congress on insurance and reinsurance of agricultural risks, held in Morocco recently, agreed that one of the hardest jobs was to convince farmers that spending money on premiums was a worthwhile investment, reports Commercialrisk Africa.

Newton Jazaire, managing director of Kampala-based Lion Assurance, said: “I know that farmers complain they have spent money on premiums and seen no benefit. It makes it very hard to persuade them to buy insurance the following year.

They don’t appreciate how useful insurance is as a risk management measure. Coupled with a low level of literacy, it is a huge problem. “They don’t realise that a premium of 5 percent is not expensive when compared to the cost of a loss. We had a fire in a Kampala market recently and, again, few had insurance. There is a marked difference between those without insurance and those who were insured and who are now back up and running their businesses. It is a good example to show the farmers.”

But Jazaire said under-insurance is an industry-wide problem, not just agricultural. “We have some $200 million of insurance premiums annually in Uganda but there are some large businesses which only buy the bare regulatory minimum of cover. There is a real opportunity for insurers to do so much more.”

From the agricultural perspective, he says that Uganda’s climate is good for agriculture with good rain and warmth. However, the majority of farms are still very small. Insurers have formed an agricultural insurance pool to offer the capacity on an individual basis.

The pool also launched a weather index product into the market, with the backing of Swiss Re.

The result is that the insurers are now beginning to reach more farmers, particularly those that operate in a cooperative.

Jazaire said that he attended the Morocco conference to see what other countries were doing and to learn from their successes. Amit Khilosia, regional manager, Africa at Lloyd’s, said: “I certainly wanted to get a feel for what industry professionals in Africa are saying about agricultural risk to understand what opportunities exist and how Lloyd’s can contribute as part of our development in Africa.

“By developing agriculture it affects so much more — from infrastructure to dealing with food security. There needs to be political will and funding to provide appropriate infrastructure and subsidies in order to support growth as demonstrated in a growing number of markets.”

Lovemore Forichi, vice president, property and speciality at Swiss Re, agreed he was there to learn about the African risks. “We are all learning about the risks we are facing in agriculture in general around global warming and the risks that warning poses to yields.

Forichi added that links between government, insurers and farmers need to be increased if the continent is going to meet that challenge.

There is something like $180 million agricultural insurance premium across the whole continent and some $160 million of that relates to South Africa,” he said.

“We see new opportunities but also new challenges. Much of the recent focus has been on smallholders because it has been a neglected area for so long.” But Forichi said there are other trends too which could prove interesting for the insurance sector—such as the land banking in certain areas and the increase in European, Indian and Chinese firms investing across the region.

Massive greenhouses are being built in Ethiopia for example, as some corporations move their operations out of Kenya to enjoy the benefits of a lower tax regime.

By:  Modestus  Anaesoronye