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THE Government’s recent resolution to push for an agriculture and rural service insurance plan cushioning farmers from crop and livestock losses caused by unexpected incidents and natural disasters will make farmers risk-free and allow them to do business with other value-chain actors with confidence.

Many farmers have over the years lost crops to natural disasters, with some failing to recover the value of their produce damaged by rains, droughts or even fires because of lack of insurance. 

The insurance plan Government set in motion should change this soon, with the Agriculture Finance Corporation Insurance Company providing affordable insurance cover to farmers across the agriculture value chain.

Essentially, the majority of agricultural assets are exposed to vagaries of the weather with the risk most likely to double as the effects of climate change become more severe with time, which requires farmers to have insured their activities to be on the safe side. 

Of late, climate hazards such as floods, hailstorms, strong winds and dry spells, which affect crops, are on the increase and look set to become regular occurrences.

The farmers’ already dire situation is made more complex by the fact that agriculture insurance penetration remains extremely low for various reasons, with lack of information and reluctant attitudes to take up policies topping the list. 

In general, agricultural insurance is one of the most ignored tools for risk management although it plays a fundamental part in managing risks associated with farming.

To some farmers, taking up insurance policies comes across as an expense without evident benefits, a view naturally held by those who have not experienced disasters that leave their entire crops or livestock units decimated yet they do not have fall-back plans in place. 

Surveys have since shown that the levels of insurance uptake in the farming sector in Zimbabwe are very low, with agriculture’s contribution to the gross premium income of insurance products currently at a paltry three percent yet it constitutes about 25 percent of the national gross domestic product (GDP).

The insurance advisory service for African farmers report once noted that only about 650 000 farmers working on less than two percent of the agricultural land in sub-Saharan Africa had cover yet insurance coverage can allow farmers to invest even in highly risky but potentially very lucrative farming activities.

It is refreshing to note that Zimbabwe has since teamed up with other countries to work on an insurance lab to come up with climate change mitigation solutions to cover smallholder farmers who rely on rainfall to grow their crops, but have no access to insurance.

The insurance lab is being spearheaded by the Insurance and Pensions Commission (IPEC) and sponsored by Access to Insurance Initiative. 

It will come up with mitigation measures for climate related risks such as cyclones and drought that have become very frequent in recent times. 

Three other countries participating in the insurance lab are Costa Rica, Grenada and Zambia.

But it is the need to educate farmers, most of whom are still débutantes in the industry on the need to take up insurance cover given that most of them are not used to the culture of insuring assets. 

It is unfortunate that the country’s economic cycles have gone through hyper inflationary phases many times with people losing all they had saved in a development that left dents that are difficult to erase from their minds. 

Such incidents have negatively affected people’s perception of saving and consequently the uptake of such things as insurance cover even if some people fully know their purpose.

There are also cases of malpractice by some insurers that have left many farmers vowing never to take up insurance cover again after they were given raw deals or made to pay for promised services that never came at their time of need. 

This has contributed significantly to the current uptake of insurance cover hence the need for fresh re-orientation of farmers on the logic of forgetting the past and moving on.

It is crucial for the farmers to appreciate that insurance policies help them secure human capital, assets, livestock, crops, equipment, finances and even markets to say the least. 

Agricultural financiers also need security on their investments in agricultural activities of smallholder farmers, for instance, in light of various climate-induced disasters and can find it easy to work with farmers with agricultural insurance.

Insurance will give financiers a guarantee that they can recoup their money even in the event of an outright crop failure because of uncontrollable circumstances.

Agricultural Finance Corporation (AFC) Holdings acting chief executive, Francis Macheka, recently emphasised that insurance against the vagaries of inclement weather gave financiers a guarantee of recouping their investment in times of calamities, particularly for smallholder farmers who are considered as “high risk.”

Smallholder farmers are arguably the protagonists in the theatre of agricultural production since time immemorial, contributing about 60 percent of the output yet financial institutions are not motivated to finance them.

 This is also despite the fact that they are the biggest contributors to the national strategic grain reserves, which has pushed the Government to call for compulsory insurance schemes before they are eligible for agricultural inputs loans such as Pfumvudza/Intwasa.

The unavailability of insurance cover is essentially depriving many smallholder farmers of the opportunity to fully demonstrate their potential in farming thereby short-changing themselves and the nation of the possible revenue they could have generated if they had been insured.

 The stark reality that they are also situated in sparse geographical locations increases transactional costs with small hectarages being put under crops, which sees private insurance companies shunning dealing with them.

The good thing now is that the Government, through the AFC’s insurance department, is putting mechanisms to rope in private insurers to hedge agriculture activities against losses due to hailstorms, droughts, floods, and pests. 

AFC, on the other hand, is also extending its tentacles to forge partnerships with private sector companies that have tailored products.

What now remains is for the insurance sector to avail quality tailor-made insurance products for small-scale farmers at affordable premiums that can attract more takers instead of scaring them away. 

Most farmers complain of high premiums, which they feel are unaffordable and also not worthy of the services they later receive in the event of a problem. 

With affordable premiums, more farmers can take up insurance, which can raise the current uptake levels that are at three percent, to a bigger figure.

Insurance underwriters must also work hard to restore customer confidence in the wake of unscrupulous firms “ducking and diving” when faced with genuine insurance payout claims. 

Many farmers and the general public currently have strong convictions that insurers are there to collect premiums and refuse to pay claims. There is a need to have the lost confidence restored.