African agriculture insurance set for boom

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Kenya has unveiled a policy paper to boost uptake of agricultural underwriting in a country where the cover accounts for less than 1% of the total insurance premiums, exposing many farmers to losses.

The country unveiled the National Agricultural Insurance Policy – the first policy to guide agricultural underwriting – as the state hopes to deepen public-private partnerships in spurring uptake of livestock and crop insurance among farmers.

The move came as Continental Re published a report on agriculture insurance, in which experts from across the world cited the need for innovation.

The report reveals that, for insurers, some interesting trends have emerged through the Covid-19 pandemic as a split in buying habits between rural and urban policyholders across Africa accelerated.

Capitalising on that surge in interest in insurance among rural communities will not be straightforward, as Evance Rabong’o, agricultural lead at Continental Re, explains in the report.

“There are difficulties in persuading farmers, for example, to buy insurance for longer-term risks, such as crop protection,” he warns, adding: “Now is the time for the insurance sector to be creative and to look at not just designing fit-for-purpose products but also to look at the way in which insurance is sold.”

For example, he says, it is hard to access finance to buy insurance policies but if insurers were prepared to reassess when they collected premiums, the products might become easier to sell.

This could involve, for example, collecting premiums at harvest time, when the farmer has greater spending power. It could also involve working more closely with banks to realign available finance with insurance protections, or working with governments to allow governments and policyholders to share the burden of the cost of insurance.

Richard Leftley, CEO of Micro Insurance, adds: “With Covid-19 we noticed a significant uptick in demand for health insurance, as people become more aware of the costs associated with being hospitalised. As a result, we saw a steady increase in sales for our very basic health cover, including among policyholders from the agricultural sector.”

While he says that was no surprise, he had not expected the trend that then emerged.

“Those working in the agricultural sector were among the best when it came to payments,” he says.

As insurers, Mr Leftley says, there is always recognition that it is one thing to sell insurance but another thing to get paid from the low-income sector.

“What we saw was an urban-sector spike in health insurance purchases but we failed to collect the premiums. In fact, the payment collection success rate was significantly lower than pre-lockdown, because people were losing their jobs and were worried about their finances.

“In contrast, in the rural sector, farmers continued to make payments because they were less affected by lockdowns and they were able to maintain their incomes,” he states.

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