Low confidence hampers agricultural insurance uptake

THE majority of Zimbabwean farmers are uninsured, posing a serious threat to the sector in the face of prevalent insurable risks.
The country has witnessed a tremendous rebound in the sector on account of improved rainfall and government-funded programmes as well as private sector-driven contract schemes, resulting in self-sufficiency in crops such as maize and wheat.

However, there is concern that the lack of insurance cover remains a threat given the potential hazards along the production chain. “Risks in all these areas are insurable,” Zimbabwe Farmers Union executive director, Paul Zakariya, told The Financial Gazette this week. Zakariya said there was a need for engagement between the agriculture and insurance sectors to not only raise awareness, but to restore confidence after the insurance losses experienced in the past.

Confidence in the insurance sector plummeted after Zimbabweans saw their savings eroded by two cycles of hyperinflation in 2009 and in 2019. The government has since begun working on the compensation modalities for the losses. Mismanagement by insurance players has also held farmers back.

“Past experiences, which were not so pleasant, have kept farmers away from insurance. It is incumbent upon all players in the agricultural industry to come together and design insurance products that are appropriate for all categories of producers as well as processors.
“The small-holder sector is barely covered by insurance and yet the risks around this category come in all shapes and forms. Insurance can be, as indeed it is, a powerful financial tool in the hands of farmers,” Zakariya said.

Commercial Farmers Union chief economist Antonnette Chingwe stressed that even in tobacco farming, which is of a more commercial nature, there were misgivings due to unfulfilled obligations in the past.

“Farmers feel prejudiced, as some who are insured have failed to get compensation from insurance companies when disaster strikes. This has been common for tobacco insurance. Farmers complained of the high insurance premiums but when hail destroyed some crops most farmers were never compensated,” Chingwe said.

“Also, it seems our local insurance does not mature. You pay consecutively for over 10 years and if you do not encounter a disaster for those years, there is no maturity payout and as a result farmers tend to relax and develop a syndrome that we will act when it happens,” she added.
Chingwe said despite the current low uptake, insurance protection was a necessary component of the country’s agriculture sector.

“Insurance is key particularly given the erratic weather patterns and also provides a fall-back position. Insurance against erratic weather and natural disasters, fire, accidents and theft are the common ones.

“With Minerva and other players having come up with weather index insurance… it seems that’s the most popular insurance in recent years.”
CredSure operations manager, Masimba Chimwara also told an online meeting last week that low confidence in the market had also affected the sector’s appetite for insurance products.

“Agriculture constitutes about 25 percent of our GDP and only two percent of our insurance premiums. There is a huge disparity, our agriculture is not insured. “In terms of uptake, the highest is in tobacco because of contractors in the sector, and the payment model where premiums are paid at the point of sale rather than at policy inception,” Chimwara said.

“We still need to educate our farmers on insurance as most of them are new to the sector and they do not have a culture of insuring their assets. So, engagement and education are key.

“We note that the economic cycles the country has gone through … the hyperinflation where people lost all they had saved, negatively affects insurance uptake, as well as bad market practices by some of those insurers who came before us, who had many malpractices and failed to serve the market, all contribute to low uptake,” he said.
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