Tawanda Musarurwa

The low uptake of agricultural insurance in Zimbabwe can be linked to changes that occurred in the sector, which insurance companies have failed to respond to.

The turn of the millennium saw the country’s agricultural sector undergoing a seismic shift, as the Fast-Track Land Reform Programme (FTLRP) spawned a new breed of farmers.

FTLRP, which was implemented through the Land Acquisition Act of 2002, resulted in the redistribution of some white-owned commercial farms and estates, as well as State land to over 150 000 farmers under the A1 and A2 farm models.

Of particular interest are the A1 farmers that were allocated small plots for growing crops and grazing land. 

The majority of these farmers have been operating at subsistence level and have not accumulated property and equipment that commercial farmers possessed, making them less appealing to insurers.

Notwithstanding these limitations, smallholder farmers play a significant role.

According to figures from the Zimbabwe Smallholder Organic Farmers Forum (ZIMSOFF), smallholder farmers are the biggest producers of diverse food crops.

It is estimated that they supply over 80 percent of agricultural produce consumed locally. African Risk Capacity (ARC) chief executive officer Mr Lesley Ndlovu says agricultural insurance products need to be relevant and viable for insurers.

“Agriculture is the mainstay of the economy, so if we are going to cover the protection gap, we need to offer products that meet the needs of players in the agriculture sector,” he said.

“There is need, perhaps, for a new technology to aggregate smallholder farmers, because currently the cost of signing up these farmers individually does not make economic sense for an insurance company.”

Although 2020/2021 cropping season has been one of the best in recent years, the agriculture sector remains vulnerable to drought, floods and hailstorms.

The 2018/ 2019 season was particularly affected after it was hit by Cyclone Idai and an El-Nino- induced drought, which resulted in extensive crop failure and loss of livestock.

But traditional agricultural insurance has failed to mitigate against these risks with regards to subsistence and smallholder farmers due to the lack of suitable insurance packages.

Despite sweeping changes in the local agricultural landscape over the last couple of decades, agricultural insurance has largely remained unchanged from a form of property insurance, with hail insurance being the most widespread.

Data from the Insurance Council of Zimbabwe (ICZ) shows that consumption of insurance services contributed just 1,45 percent to the gross written premium (GPW) for the industry between January to June last year.

Sector regulator, the Insurance and Pensions Commission (IPEC), is pushing for the development of parametric insurance products, which essentially go beyond the limitations of traditional insurance products insofar as they cover the probability of a predefined event happening and pay out according to a predefined scheme.

With regards to the agricultural insurance segment, IPEC is currently developing a weather-based index framework.

“We are working on a framework to introduce weather index-based agriculture insurance aimed at boosting the uptake of agriculture insurance,” said IPEC Commissioner Dr Grace Muradzikwa.

Indemnity-based agricultural insurance products tend to be most suitable for communal farmers, as such products assess the crop loss and insurance compensation on-site based on the real loss at the policyholder level.

Hence, new adjustments in agricultural insurance products should also show a shift towards input-based products compared to yield-based products.