At least 13 insurance companies have pulled out of the tobacco industry citing the high risk associated with the crop, insurance experts said last week.
Tobacco Industry Development Support Institute’s insurance representative Mr Togarepi Rupurai said out of the 23 insurance companies in the country, only 10 were still supporting tobacco.
“In 2012, insurance companies collected US$5,9 million in terms of revenue from farmers and in 2013 the figure has dropped to US$1,9 million,” said Mr Rupurai.
He was speaking during a tobacco and insurance stakeholders’ meeting in Harare.
The major challenge with the tobacco industry, Mr Rupurai said, was that it had a poor mode of premium collection.
“Instead of collecting the premiums before a member joins, the insurance companies collect their premiums at the end of the season when farmers sell their crop,” he said.
“Some farmers end up side marketing the crop and the insurance loses out on premiums. Others even default in payment when they have claimed for damages in the case of their crop being destroyed by natural disasters. The companies then end up incurring huge losses.”
Mr Rupurai said some farmers were not willing to insure their crop, especially after the dollarisation process where many people lost their money to inflation.
“Some farmers no longer have confidence in insurance companies and are not willing to insure their tobacco,” he said.
“The insurance companies can only function well if they have large numbers of members, so the resistance by tobacco farmers is also affecting the business.”
Zimbabwe Farmers’ Union second vice president Mr Berean Mukwende encouraged insurance companies to develop a strong relationship with farmers and make a follow-up even at the farm to see the crop they would have insured at every step.
“Insurance companies should also work with Agritex and farmers’ unions as this will help them in identifying farmers,” said Mr Mukwende.
“You should develop a strong relationship with farmers. You should not just wait to carry out transactions at the auction floors when farmers sell their crop, but your officers should be able to move around farming areas assessing the beneficiaries of your projects.”
Bankers’ Association of Zimbabwe representative Mr Abel Sanderson urged tobacco farmers to develop a system of banking their money so that they could access loans. He said farmers were failing to access funding from banks because of lack of collateral, but this could be solved if the farmers organised themselves into groups and borrow as a group.
“The organisation or union’s assets can then be used as collateral,” said Mr Sanderson. “The majority of farmers do not participate in producer organisations and providing finance to them will be a challenge.
“Producer organisations allow smallholders to consolidate their influence in the value chain, enabling them access to a variety of benefits, including financing from social lenders based on purchase orders.”
The meeting also discussed several challenges being faced in the tobacco industry and possible solutions.
It was agreed that several stakeholder meetings should be held in preparation for the 2013/14 season to iron out outstanding issues affecting production in the tobacco industry.