In Summary
  • As technology advances, coupled with a wind of change in investment perceptions, insurance companies are beginning to see the prospects of capitalising on solving the farmers’ agricultural uncertainties; through providing agricultural insurance.

Dar es Salaam. For many years, investment in agricultural improvement has focused on farmers’ know-how but not farmer’s ability to deal with natural calamities and other uncertainties or risks associated with their business.

As technology advances, coupled with a wind of change in investment perceptions, insurance companies are beginning to see the prospects of capitalising on solving the farmers’ agricultural uncertainties; through providing agricultural insurance.

Strategis Insurance (Tanzania) Limited (SITL), which has been providing medical insurance for over 15 years now, becomes the latest company to announce plans to invest in agricultural insurance, setting the pace in the sector of the economy that has been shunned by many.

Recently, when SITL said it was intending to take up agricultural insurance as part of its new line of business in general insurance provision, questions arose as to how it would surmount the barriers that have failed the sector for years. Insurers in the country believe agriculture is too risky to cover because smallholder farmers face challenges such as climate change, insecure land ownership and difficulties in accessing capital and farm inputs.

According to the SITL’s chief executive officer, Mr Kain Mbaya, the farmer’s challenges in accessing agricultural insurance are systemic and the approach for solving them has to be multisectoral.

“For instance, there is no inclusive data for the farmers, detailing what they produce, where and how. What we have decided to do is collaborate with ministries dealing with finance and agriculture in building a database for the farmers. When this is done, we can do business,’’ Mr Mbaya said. “We intend to go to rural areas and educate farmers on the importance of being insured,’’ he told The Citizen.

How it will be implemented

The SITL planning officer, Mr Emmanuel Jimmy, says before the company arrives at the cost of insurance, it will have to analyse the cost of operations and profits, which are expected from the agricultural produce of the farmer. “The value of the farmer’s land will determine the amount the farmer will pay to be covered,’’ Jimmy said. SITL’s move comes at a time when the Tanzania Insurance Regulatory Authority (Tira) aims at ensuring that 50 per cent of Tanzanians can access more than one insurance product by 2028. Currently, only 15 per cent of Tanzanians have access to more than one insurance products, says Tira.

One of the key aspects of the economy in Tira’s plans is agriculture, said the Commissioner of Insurance, Dr Baghayo Saqware.

“We are now striving to attain middle-income status and agriculture is one of the sectors that can take us there. So, it’s important that insurers begin expanding into this market,’’ said Dr Baghayo.

Can it help transform economy?

About 75 per cent of Tanzanians live in the rural areas where their livelihoods depend on agriculture. The sector contributes significantly to the country’s economy. With over 38 per cent of adults reporting hunger due to drought as their third biggest risk, the value of having an agricultural insurance product is evident, says a 2014 study, titled: Tanzania Agricultural Insurance Feasibility Study. In India, agriculture insurance grew to enable access to agricultural credit for over 22 million farmers, unlocking a value of $3.1 billion in agricultural investment. But, in Africa, weather risks threaten the gains made in agricultural investment.

This affects productivity.

“Farmers’ productivity increases when covered on insurance because this cover gives them confidence to produce more without fear of losses,” says Mr Prosper Peter, the Insurance Officer of National Insurance Corporation (NIC) who spoke ahead of the just-ended Farmers’ Day.

NIC has also introduced the Bima ya Mazao initiative to boost farmers’ agricultural output, says Mr Peter. “The aim is to enable them deal with uncertainties and carry out farming sustainably,’’ he says.

There is growing interest among insurers to take up agricultural insurance as researchers insist that the cover for smallholder farmers is still absent in the market.

This, they say, is a gap and a space for opportunity that the insurance sector can utilize to develop relevant products for this market and expand their market share.

Are farmers aware?

Majority of smallholder farmers in Tanzania are not aware of crop insurance cover, according to Tira’s Northern Zone Manager Mr Eliezer Rweikiza.

“A major public sensitization drive is needed to convince them to insure their crops,’’ he says, adding that many farmers have incurred heavy losses due to disaster-related crop failures because they have not insured them. This would have otherwise assured them of compensation.

He says, unlike in the developed and some developing countries, Tanzania is still lagging behind in agricultural insurance sector, making it less profitable.

Currently, there is growing interest among insurers to take up agricultural insurance as researchers insist that the cover for smallholder farmers is still absent in the market.