Agri — Insight
Today, I will delve into a topic that has, for years, formed the nucleus of protracted deliberations from all angles.
Despite the ongoing discourse, it appears the subject has still remained unpalatable for the intended audiences.
I am talking here about crop insurance, whose relevance seems to be only acknowledged each time there is a disaster and once it is over, the matter also ebbs into the distant horizon to await a fresh emergency.
It seems few farmers appreciate the importance of insuring crops even though they fully understand the risk natural or man-made disasters pose to crop farming, hence they are always waiting to cross the bridge when one gets there.
This obviously indicates that people with such an attitude do not have a Plan B in place and will at the mercy of situations once such calamities befall them.
In recent times the agricultural sector had become over-burdened with loads of uncertainty and in going through numerous challenges ranging from unpredictable weather patterns to fluctuating market prices.
Such unpredictability easily translates to huge financial losses for those farmers who do not insure their crops. It is an undisputed fact that crop insurance is an essential tool for securing farmers' livelihoods.
Recently, there were reports of crops and infrastructure that were destroyed by hail storms and violent winds that hit some parts of the country at the onset of the current rainy season. The disheartening fact is that the affected farmers started the season already sitting on heavy losses, which they could have avoided.
Generally, the cost of insuring crops is way less than the value of the crop at risk yet the idea of taking out crop insurance policies seems to scare the farmers.
Interestingly, the high incidence of natural disasters that has become synonymous with recent farming seasons do not seem to presenting any serious threat to farmers with the majority just ignoring the calls to protect their operations. Maybe it is because they have no disposable cash to set aside for the purpose due to economic challenges.
The few farmers that used to insure crops and have since stopped doing so always recount harrowing experiences at the hands of their insurers after making the decision to take out policies before going through hell to secure compensation after disasters.
It is such experiences that are keeping some farmers away from taking the decision to do the right thing.
Some have recounted stories of how bogus insurance companies scammed them out of thousands of dollars at some point and never gave them the services they had signed up for. In fact, such farmers would have suffered a double tragedy in which their money would have just vanished while their crops would also have been destroyed. It is true that once bitten, it will be twice shy.
The good about insurance is that it covers for the loss or damage that happens to the crop while in the field, in transit to point of sale or while being loaded into the transporting vessel en route to the market.
There are basically two broad categories of insurance, namely indemnity (multi-peril) based and parametric.
The indemnity-based is the most common type. It basically covers the most common perils like hail, wind, fire, theft, wild animals, falling aerial objects and frost and it is cheaper.
The parametric insurance policy also called index-based insurance covers farmers against drought, excessive rain and extremely hostile temperatures.
Under this insurance, the farmer is covered against less than the historical average rainfall required for the crop to grow well wherein if a farmer gets less than the historical average, the policy is triggered and he gets a pay-out and the opposite is true when there are excess rains.
The area yield index insurance uses the historical yield for a farmer.
If a farmer had an average yield of three tonnes per hectare over the past five years and achieves one tonne per hectare, payment will be made on the two-tonne difference and the maximum payment of the policy.
The beauty of insurance policies that farmers do not seem to notice is that they are specifically designed to protect them against the financial implications of crop loss due to natural disasters, pests, diseases, and other unforeseen events.
By paying a regular premium, they can attain peace of mind that they will receive financial compensation if their crops get damaged or destroyed under certain circumstances. This not only helps them recover from financial losses but also supports their agricultural activities, contributing to the overall resilience and sustainability of the agricultural sector.
Crop insurance offers financial security to farmers and with the assurance of compensation for potential losses under the chosen crop insurance plan, farmers can plan their investments and operations with greater confidence.
This safety net is crucial for maintaining a stable income and supporting their families, even in adverse conditions.
The financial security that comes with insurance policies enables farmers to reinvest in their projects, adopt better farming practices and purchase necessary equipment without the fear of financial ruin.
On the one hand, insurers are also not saints in this whole debacle - they have played their fair share of the tomfoolery wheedling farmers into taking up policies before becoming very inaccessible when it comes to problems requiring them to fork out compensation funds.
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Farmers have always complained of insurers that suddenly become attentive to details they ordinarily do not care to look at during the process a farmer takes out insurances. It seems some clauses are crafted with the intention to frustrate farmers trying to get compensation while some of the insurers do not have farmer-friendly products.
They cater for one class of farmers, usually the commercial category while the smallholder is relegated to the sidelines.
I guess it is time the Government requests insurers to submit application forms that would have been successful and have people going through them to check for transparency.
Policy providers should also be required to tailor-make some products according to the various farmer categories in the country.
The current push to not leave anyone or any place behind should also apply to the insurance sector.
In reality, every farmer needs it, but it may be the conditions insurers put in place that are scaring them away, hence the need for something that is transparent and tailor-made to suit particular farmer groups.
Insuring crops presents advantages crucial for the financial security and stability of farmers.
These range from protecting farmers against income losses caused by natural disasters to encouraging investment in agriculture, the benefits of crop insurance are extensive and vital for the agricultural community.
