Insurance has for Nigerian farmers, been considered a myth, yet, holds the solution to repeated complaints over the years when losses are recorded across the value chain, especially in primary production.
In recent years, insurance firms have tried to step up their game, as the agric sector appears to be attracting more attention and funding. For investments to be secured, however, insurance is required to guard against unwanted turn of events. This week, a workshop, which had insurance companies in attendance, saw Area Yield Index insurance, getting into the spotlight as a way of compensating farmers for losses, ensuring they don’t get discouraged in production.
According to the World Bank, under this type of insurance, the insured yield is established as a percentage of the average yield for the area (typically 50–90 percent of the area average yield). An indemnity is paid if the realised average yield for the area is less than the insured yield, regardless of the actual yield on a policyholder’s farm.
“The insurance companies are getting ready to ensure efficiency in the agric sector. Index insurance is what we are looking at now and not the conventional indemnity-based insurance, where you have to suffer a loss before you can be compensated,” said Leo Akah, director, policy and regulation, National Insurance Commission (NAICOM).
This type of insurance, he said, provides a good backing for farmers especially as it covers adverse weather, which usually affects farming in the country.
With farming in Nigeria considered high risk and prone to losses, Pula Advisers Nigeria Limited, which organised the workshop session, highlighted a form of Area Yield Index insurance it developed, and says is a first of its kind offering in Nigeria. It reiterated plans to deliver innovative agricultural insurance and digital services to help smallholder farmers endure climate risk, improve their farming practices and bolster profits.
“Currently Pula is the only company doing this kind of insurance called Area Yield Index Insurance which is basically for smallholder farmers through aggregators that covers both climate risks of drought, flood, diseases and pests, wind, hailstorm that affect the yield of the farmers,” said Sarfraz Shah, director, insurance operation, Pula. “We work closely with the banks, input providers like the fertilizer and seed company, the insurance companies like Veritas Kapital, Leadway and many others, the government and regulators to ensure that whatever we are designing is supporting the entire industry.”
In the last five years, the firm he said, has insured over 4.5 million farmers and has been working closely with them to generally improve productivity.
The company, says it plans to ‘revitalise agriculture insurance in Nigeria’ by collaborating with existing insurance companies and gaining active participation of small holder farmers. To achieve this, Shah explained would be derived from the company’s experience in designing and implementing innovative products around the world since 2015.