Why insurance brokers are an essential partner for farmers

Gibson Mhaka, Senior Reporter 

WHEN it comes to the business of agriculture, research has shown that insurance is not just a means of protection against major events, loss, and damage. 

It is a valuable risk management tool that allows farmers to plan for the future with peace of mind, knowing that they are protected if their crops, machinery, or livestock experience loss or damage.

For this reason, insurance can help farmers protect their livelihoods and recover from unexpected losses. 

Understanding its importance can help farmers safeguard their investments and ensure business continuity.

Additionally, it provides liability coverage to protect against lawsuits resulting from accidents or injuries occurring on the farm, thereby safeguarding the financial and reputational assets of the farm.

By purchasing agricultural insurance, farmers can better prepare for the unpredictable nature of agriculture, allowing them to focus more on productivity and sustainability rather than the constant threat of financial disaster.

To achieve this, farmers need to work with certified insurance brokers who understand the stakes involved in safeguarding the future of their business.

Insurance brokers and agents can be a valuable resource for farmers because they can provide technical expertise and a deep understanding of the challenges farmers face.

According to the insurance regulator in the country, Insurance Pension and Commission (Ipec, the uptake of agriculture insurance in Zimbabwe remains very low, fluctuating around three percent.

In the first quarter of 2021, agricultural insurance accounted for 3,35 percent of the Gross Premium Written, compared to 2,13 percent recorded during the same period in 2020. 

While this represents a slight increase, it remains a low percentage for an agro-based economy.

Following the devastating 2023/24 El Niño-induced drought, AFC Insurance Company has taken the initiative to provide innovative insurance solutions to safeguard farmers against the increasing risks posed by extreme weather events.

Recognising the urgent need for protection against the increasing risks posed by extreme weather events, AFC Insurance has introduced tailored crop and livestock insurance products. 

These products offer farmers a financial safety net to help them recover from disasters. To further support farmers, AFC Insurance Company recently organised the 2024/25 Seasonal Forecast Dissemination Conference in Harare.

The workshop, organised in collaboration with Government agencies, international organisations, and research institutions, focused on unpacking the seasonal forecast and discussing strategies for managing climate risks. AFC Insurance Company managing director Mr Cuthbert Masukume said the 2024/25 Seasonal Forecast Dissemination Conference was meant to review the impact of El Nino as well as discuss La Nina, its effects to the agriculture sector and how best farmers can prepare for it.

“Insurance should be treated as an input in agriculture. When a farmer is taking money from the bank, budgeting for seeds, fertiliser, working capital, and labour, they should also put in that same budget a budget for insurance,” said Mr Masukume.

Insurance should be recognised as a vital tool for mitigating risks associated with farming. 

By incorporating insurance into their financial planning, farmers can safeguard their investments and protect their livelihoods against potential losses caused by unforeseen events such as natural disasters, crop failures, or livestock diseases.

Insurance brokers can also play a crucial role in promoting and facilitating insurance uptake among farmers.

By collaborating with brokers, companies such as AFC Insurance can expand their reach and effectively disseminate information about the benefits of insurance to a wider farming community.

Brokers can also act as trusted advisors, educating farmers about the importance of insurance and addressing their concerns and questions. This collaborative approach can significantly increase the adoption of insurance among farmers, ultimately contributing to the overall resilience and sustainability of the agricultural sector.

By recognising the value of insurance and leveraging the expertise of agriculture brokers, farmers can safeguard their investments, protect their livelihoods, and contribute to the growth and development of the agricultural sector.

Secretary-General of the Insurance Brokers Association of Zimbabwe (IBAZ) Dr Richard Mutyavaviri said an insurance broker is a very essential partner for farmers.

He said brokers can assist farmers by finding appropriate cover at the right price, with the correct insurer. 

They can also help farmers with claims management and the entire risk management process.

“Brokers possess specialised expertise in agricultural insurance, allowing them to find customised products tailored to specific risks. By appointing a broker, farmers will be outsourcing a major component of their risk management process. 

“The broker will work with the farmers to tailor-make appropriate insurance covers for their crops and livestock,” he said.

Turning to the broker’s value-addition to the farmer-insurer relationship, Dr Mutyavaviri said, “Brokers are always on the ground, conducting thorough risk assessments and developing tailor-made packages to suit the farmer’s specific needs.

“Brokers are the experts. They can lead brainstorming sessions to ensure all aspects are covered. 

“As independent agents, brokers are not tied to a single insurer and prioritise the farmer’s best interests. They source the right coverage at the right price for the farmers.”

Weighing in on how brokers can assist farmers in navigating the complex world of agricultural insurance, Dr Mutyavaviri said since insurance is a legal contract with its own jargon, brokers will unpack it on behalf of the farmers.

“Farmers will be told in advance about the type of contract they are entering into before they make their own decision.

“The broker will scan the entire market on behalf of the farmer and ensure they get the right product at the right price with the correct insurer. 

“In addition, if the broker makes an error, the farmer does not lose out as they carry professional indemnity cover, which will cover that gap.

“In the event of a claim, a broker will guide the farmer through the settlement process. The onus of completing a claim form and lodging a claim is with the client. Brokers can, however, assist the client to fill it in correctly,” he said.

According to Zimbabwe Commercial Farmers’ Union (ZCFU) Matabeleland North provincial chairman Mr Winstone Babbage, insurance, despite being one of the most important risk management tools to mitigate risks such as droughts, floods, hailstorms, fires, pests, and diseases, the uptake of agricultural insurance in Zimbabwe remains very low.

“There are various insurance products in the agriculture space and they include Area Yield Index Insurance, Weather Index Insurance, Hybrid Index Insurance, among others. Despite the availability of these insurance products, the uptake of agriculture insurance in Zimbabwe remains very low.

“From the workshops which have been conducted by various stakeholders including the Government, partners and private sector, it was noted that the uptake of agriculture index insurance among farmers and extension workers is often low due to a lack of awareness and understanding of how it works. 

“Sensitisation workshops can play a crucial role in educating stakeholders about the benefits and mechanisms of agriculture insurance and how it can be integrated to de-risk and provide output shocks,” said Mr Babbage.

Mr Babbage said brokers who are familiar with the complex rules and regulations governing agricultural policies should help farmers to partake in insurance in order to mitigate factors that impact risk, including fluctuations in market prices, crop yields, and climate-related issues.

Various research conducted by organisations such as the World Bank, United Nations Development Programme (UNDP), the African Development Bank (AfDB), the International Finance Corporation (IFC), the World Food Programme (WFP), and Government departments indicates that insurance companies are reluctant to provide insurance to smallholder farmers due to high risk, low return, and limited specific solutions and products.

This research also highlights a lack of co-ordinated efforts among insurance players in the agriculture sector further exacerbating the issue.

Livestock specialist Mr Mhlupheki Dube said by purchasing agricultural insurance, farmers can better prepare for the unpredictable nature of agriculture.

This, he said, allows them to focus more on productivity and sustainability, rather than the constant threat of financial disaster.

“The first aspect to truly appreciate is that any form of insurance is crucial because it serves a specific purpose.

“The need for insurance signifies an awareness of potential situations that could significantly impact a farmer’s finances in a short period. By continuously contributing to an insurance policy, farmers can safeguard themselves against such eventualities. 

“This is a wise strategy that highlights the value of insurance and the vital role of skilled brokers in guiding farmers through this process. It means the broker is prepared to alleviate the farmer’s burden when needed,” he said.

Mr Dube said the benefits of insurance for livestock farming are often limited, highlighting the need for insurance companies to develop more robust and tailored insurance products to meet the specific needs of Zimbabwean livestock farmers.

“While insurance products for livestock in transit are important, they only address a small portion of the risks faced by livestock farmers. Many Zimbabwean farmers still lack comprehensive insurance coverage that adequately protects their livestock investments from significant threats such as disease outbreaks, drought, and theft.

“For instance, livestock farmers in recent times have lost and continue to lose animals to serious diseases like January disease and brucellosis.

“These are real and very serious issues that insurance brokers can address by partnering with farmers and educating them on the value of comprehensive insurance coverage. 

“By understanding the unique risks faced by livestock farmers, brokers can advocate for the development of specialised insurance products that adequately protect against diseases, natural disasters, and other unforeseen events,” said Mr Dube.

Zimbabwe Farmers Union (ZFU) secretary-general Mr Paul Zakariya has also consistently called upon insurance providers to offer tailored insurance products that cater to the specific needs of farmers, while also keeping premiums affordable.