CHUKWUMA ONONIWU
Chukwuma Ononiwu, FCILRM, CPPIB, an alumnus of Lagos Business School Pan Atlantic University Lagos, is an insurance broker and insurance consultant. He can be reached on +234-903-596-8732 and riskswisepro@gmail.com
An agricultural insurance policy is an insurance policy which entails the insured (Farmer) pays a premium to an insurance firm to guarantee against losses due to the insurable perils of crop failure, flood, drought, etc. The critical objective of an agricultural insurance policy is to mitigate the financial/business consequential losses principally of the farmers, and by extension, the offtakers and the traders.
The agricultural insurance policy options in Nigeria are: 1) Crop insurance. The types of crop insurance are: yield-based insurance, in which the insurance claim is predicated on the difference between the actual yield and the expected yield, taken cognizance of historical data. Other types of crop insurance are area-based insurance and multi-perils crop insurance.
2) Livestock insurance. The types of livestock insurance are: mortality insurance; health insurance and feed insurance.
3) Agricultural assets insurance. The types of agricultural assets insurance are: farm property insurance; machinery/equipment/plant insurance; and transit insurance.
4) Agricultural value chain insurance, which takes care of the business risks in the entire agricultural value chain (production, processing, warehousing and logistics). Thus, the types of agricultural value chain insurance equally include: storage insurance and market, price risk insurance.
The benefits of agricultural insurance
Agricultural insurance, like any other insurance policies, is anchored on the business template of Risk Management. Thus, agricultural insurance provides a SAFETY NET against the VICISSITUDES of unpredictable events, thereby assisting farmers/offtakers/traders to manage risks associated with principally production losses, price volatility assets damage and the consequential business interruption losses.
Agricultural insurance engenders financial stability and reduces the vulnerability and exposure of the stakeholders in the agricultural sector of the economy.
Furthermore, the benefits of agricultural insurance include: facilitation of access to credit and improved productivity.
Challenges
The challenges of agricultural insurance in Nigeria are: Literacy level; limited awareness; negative public perception of insurance generally; affordability of premium, particularly for the nano/micro/SME farmers; statistical data availability, as insurance professional practice is predicated on statistics/probabilities/actuarials/law of large numbers of pool of policyholders; quality/standard/accuracy of a national database, inclusive of a meteorological data base in line with international best practice; insecurity of farmland, etc.
Strategies
The strategies for increasing agricultural insurance density in the Nigerian economy include but not limited to the following:
Public and stakeholders awareness campaign/education/information dissemination; customised and targeted agricultural insurance policies to get into the DRAGNET the large ticket farmers, the medium ticket farmers and the small ticket farmers; affordable premium; flexible premium payment option; technology adoption that will facilitate online real time data streaming/data collation/data analytics; public private partnerships and robust sustainable engagements between the government agriculture MDAs, the insurance firms, the reinsurance firms, the banks, the agricultural co-operative societies, the agricultural products millers and the agricultural stakeholders umbrella associations, like the All Farmers Association of Nigeria (AFAN).
Nigeria has huge agricultural potentials with over 84 million hectares of arable land. The Nigerian agriculture sector is essentially: crops production, livestocks, forestry and fishing. The top states in agriculture are: Benue, Taraba, Oyo, Kaduna, Niger, Ogun, Jigawa, Kwara, Cross River and Imo with its OKOBI BUSINESS TEMPLATE, which has gained local and even, international recognition in Germany. Thus, the Nigerian Agriculture Insurance Company Limited, should do well by establishing functional business empowered offices in the above listed states and in All the states of the federation.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
