Slow agriculture insurance uptake

Regulator says aggressive marketing and awareness would reverse the poor performance

Kampala, Uganda | ISAAC KHISA | Uganda’s agriculture sector has been associated with many risks – unstable prices, drought, pests and diseases – thus hampering its growth.

This prompted the government to unveil a Shs5bn Agriculture Insurance Premium Subsidy Scheme last year for an initial five-year period in partnership with a consortium of 10 insurance firms.

This move was aimed at boosting uptake of agriculture insurance policies for both crops and livestock and so is investment in the agriculture sector, high productivity and farmer’s increased access to credit.

But available data from the Insurance Regulatory Authority of Uganda (IRA-U) shows that farmers are still reluctant when it comes to embracing the new product.

So far, only 26, 421 farmers have signed for the agricultural insurance cover utilising merely Shs692.2milion of the subsidy scheme.

“As per the approvals we have processed, a greater position of the funds is still unutilised,” said Ibrahim Kaddunabi Lubega, the chief executive officer of IRA-U during the industry’s CEO breakfast meeting held in Kampala on Nov. 23.

He said there is need for the consortium to increase awareness and marketing of the agricultural insurance covers to increase its uptake.

He said the regulator is currently engaging the World Bank and other international players to encourage farmers embrace the agriculture insurance products.

“What we are having now is almost a private-sector led but in many countries, it is a combined effort with the government to deepen agriculture insurance,” he said.

But Daka Munyaradzi, the technical manager of the Consortium at the Uganda Insurers Association (UIA) dismissed the regulator’s figures in an interview with The Independent saying they are outdated.

“By September this year, we had utilised about Shs2bn. We are even worried that the subsidy might be fully utilised by the end of December,” he said, adding that more than 44,000 farmers and not 226, 421 have accessed agriculture insurance with the help of the subsidy.

Quick facts

A 2015 agricultural risk assessment study shows that Uganda losses between US$606 million to US$ 804 million per year as a result of price fluctuations, pests and diseases in crops and livestock, post-harvest losses and drought.

Based on an agricultural Gross Domestic Product of US$ 5.71 billion, losses therefore amount to between 10.61% and 14.08% of total annual production, which is between 2.3% and 3.1% of Uganda’s GDP.

The study notes that on average, crop losses in the country due to pests, diseases, and weeds are estimated at 10-20% during the pre-harvest period and 20-30% during the post-harvest period, with the annual losses for major crops estimated to be in the range of US$ 113 million to US$298 million (mainly banana, cassava, coffee, and cotton).The losses for farmers due to price risk are estimated at US$ 262.22 million per annum.

It is a result of this that the growth in Uganda’s agriculture sector has remained between 1.5 per cent and 3 per cent annually for the last five years even as it supports more than 80% of the country’s population.

The agriculture insurance product dubbed ‘Kungula AgriInsurance’ is packaged as two sub-products: Livestock All Risks Mortality (ARM) Insurance and Crop Indexed Insurance. Under the scheme, farmers with less than five acres of farm land get a 50% subsidy while those owning more than five acres are entitled to a 25% subsidy of premiums on their insurance policies.

Participating firms

The participating insurance firms in the agricultural insurance includes; APA; Gold Star Insurance; Lion Insurance; Phoenix Insurance; Jubilee Insurance; UAP Insurance and CIC General. Others are First Insurance Company; National Insurance Company and Pax Insurance.

The industry’s CEO meeting was held just after three weeks the industry regulator granted approval for the South Africa-based financial services firm, Sanlam, to acquire Lion Assurance Company limited at US$6.5million. Sanlam officials said they would not drop any services Lion was offering on the market. This means a lot to the sector that recorded growth in premiums in recent past.

IRA-U data shows that the industry recorded premiums amounting to Shs 566.4bn as at the end of Sept.30 compared with Shs 425.3bn in 2015 amidst hard economic times.

Net earned premiums also increased from Shs 253.7bn to Shs 338.2bn while net claims incurred declined from Shs 96.7bn to Shs75.2bn during the same period under review.

However, the country’s insurance penetration remains the lowest in the East African Community standing at less than 1%. Rwanda’s insurance penetration stands at 1% compared with 2.3% in Tanzania and 3.4% in Kenya.

Growth in Uganda’s insurance premiums

Source: IRA