The Sunday News
Munyaradzi Musiiwa, Sunday News Reporter
THE Insurance and Pensions Commission (IPEC) is working on a framework to introduce weather index-based agriculture insurance that will also encourage smallholder and communal farmers to insure their crops.
Weather index-based insurance is an attractive approach to managing weather and climate risk because it uses a weather index, such as rainfall, to determine payouts and these can be made more quickly and with less argument than is typical for conventional crop insurance.
Since the turn of the millennium, the country has been hit by perennial drought emanating from a series of natural disasters that include cyclones, floods, heatwaves, hail storms, rainfall deficit, high temperatures and strong wind. The dire situation has been exacerbated by the slow adaptation to climatic changes and rainfall seasons shifting.
Insurance Council of Zimbabwe has announced that there has been a low uptake of agricultural insurances mostly by small scale farmers. In a presentation during a virtual training of journalists, ICZ representative Tendai Karonga said the reluctance by smallholder and communal farmers in taking up agriculture insurance policies was lack of insurance products that address the needs of smallholder and subsistence farmers.
“Despite the positive performance, the uptake of agricultural insurance remains subdued due to various factors. These include lack of insurance products that address the needs of smallholder and subsistence farmers who are the majority in Zimbabwe following the land redistribution exercise. Thin profit margins in the sector particularly for small scale commercial and subsistence farmers. Lack of knowledge on the benefits of insurance and risk management services. Mistrust in insurance services and reliance on traditional self-insurance in risk and loss management,” said Karonga.
According to the World Bank there are two main types of risk to consider in agriculture that are sudden, unforeseen events such as windstorms or heavy rains and cumulative events that occur over an extended period such as drought.
Karonga said IPEC was working on a framework to introduce weather index-based agriculture insurance aimed at boosting the uptake of agriculture insurance.
“IPEC is also working on a framework to introduce weather index-based agriculture insurance aimed at boosting the uptake of agriculture insurance. In addition, insurers are being encouraged to offer community-based agricultural insurances for the subsistence and small-scale farmers taking advantage of economies of scale concept. As one of its key activities, ICZ is carrying out public awareness and educational campaigns on insurance products and services,” she said.
Karonga said the country despite having an agro-based economy its consumption of insurance service was very minimal.
“Zimbabwe’s economy is agro-based, with agriculture contributing about 17 percent to the Gross Domestic Product (GDP) and about 60 percent of raw materials to the manufacturing industry. Despite the agricultural sector being one of the major drivers of the economy, its consumption of insurance service is very minimal contributing 1.45 percent to the GPW for the period January to June 2020 which is an increase of 370 percent in real growth compared to the same period in 2019. 290 percent of the growth is attributed to Hail Insurance for the tobacco crop. Main consumers of agricultural insurance are commercial and contract farmers,” said Karonga.
