Costly premiums hit small farmers hard

By Dan Mganda

Farmers in areas with higher risk of droughts and pest infestation recorded low uptake of insurance cover over the last one year, citing high charges imposed on crop insurance premiums, according to research and policy experts in the sector.

Scanty information on production levels and a measure of severity of Weather in those areas also compounded the woes of small-holder farmers in maize producing regions.

Egerton University research arm, Tegemeo Institute of agricultural policy and development said complexity in how new index-based weather insurance works has made crop insurance unattractive.

“Farmers confidence on crop cover has been eroded as a result since majority is not sure whether they are liable to compensation,” said Tegemeo Institute researcher, Erick Mukandi.

While the index based insurance is used to compensate farmers in the event of loss, compensation is awarded against a shared risk, making it complicated for small-holder farmers.

A draft index-based insurance draft policy published in June 2015 indicates that policy holder and insurer will enter a contract that should use an index that is easily observable and measurable and the value of which is objectively and independently verifiable.

“This is in order to build trust that the pay-out correctly reflects the experience and resulting contractual benefit,” reads in part the draft
It also spells out that reporting and capital requirements of insurers selling these products should reflect unique risks and nature of these products.

Farmers are still exposed to vagaries of weather, with climate change predicted to significantly lower production of coffee and tea.
However maize production could grow by five percent in the next decade under the severe climatic conditions.

Most index based insurance products in the country are still undergoing pilot projects and are yet to reach commercial viability what has been linked to the drawback faced by farmers.

The experts have challenged the government to consider bundling of agricultural based insurance products with other form of credit facilities to push their uptake.

“We should start seeing innovations like cash vouchers issued at agro-dealer to allow farmers access seeds and fertilizers and pay later,” said Mukandi.