NAICOM: Expanding insurance frontiers to farmers

Federal Government’s quest to diversify the economy with emphasis on agriculture is receiving a boost from the insurance sector with the industry regulator giving farmers more opportunities to get their investment covered. SUNDAY OJEME reports

Since the advent of the current administration, the Nigerian insurance sector has refused to be left behind in any area where it can contribute in boosting the welfare of Nigerians as well as adding more value to the economy by way of contributing more to the nation’s gross domestic product (GDP).
Besides creating products and engaging in campaigns to instil confidence in the public domain, the various measures being put in place by the regulator, National Insurance Commission (NAICOM), to place the sector in its relevant position within the economy is another proof of an imminent revival.
Confidence building
While the coordination is taking shape, one area that has not been lacking lately is the agriculture sector. Following on the heels of Federal Government’s resolve to diversify the economy with emphasis on agriculture, the insurance regulator has seen the need to invite more operators into agric insurance as a way of boosting farmers’ confidence and also enhancing self-sufficiency.
Unlike in the past when the Federal Government agric insurance agency, Nigeria Agriculture Insurance Corporation (NAIC), dominated the circle, a wider window of opportunity has been opened by NAICOM for all insurance operators to key into the programme. The initiative is expected to allow for easy and unfettered access to operators by farmers in any part of the country and to forestall the unforgettable disaster that visited some tomato farmers about two years ago.
IBAI initiative
In a recent attestation to this fact, NAICOM disclosed that it had granted product approval to five insurance companies participating in the Index-Based Agricultural Insurance (IBAI) pilot scheme. The Director, Inspectorate, NAICOM, Barineka Thompson, noted that the approvals were in line with the ongoing efforts by the current administration to diversify the Nigerian economy and create opportunities to promote agric business and employment, stressing that IBAI is a programme in support of the policy of government. According to him, IBAI is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to (international) risk carriers (Insurers), adding that in an Index- Based System, when a claim is triggered for a specific area, all insured units (farmers) within a given geographical area and having similar characteristics, are compensated at the same payout rate, usually a percentage of the sum insured, on events specifically covered by the policy (usually those for which the proxy(ies) meet the specified triggers).
He said IBAI paid out benefits on the basis of a predetermined index (e.g. rainfall level, crop yield) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional insurance services and that the purpose is to compensate farmers in the event of a loss resulting from shared risks (rather than individual risk) associated with weather fluctuations, disease outbreaks or poor yield.
Collaboration
According to him, NAICOM is collaborating with the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) on the initiative, stressing that NIRSAL is looking to expand insurance products for agricultural lending from the current coverage of 0.5 million to 3.8 million agricultural primary producers.
He said the pilot scheme was currently running in 10 states of Adamawa, Bauchi, Benue, Kaduna, Kano, Kasina, Kebbi, Nasarawa, Taraba and Zamfara, with crops like rice, maize, soya and sorghum.
“The 2017 planting (wet) season has gone with five insurance companies participating in the consortium mainly under the NIRSAL facility, we anticipate that more companies will join in the 2018 planting season as a result of greater awareness and the upcoming capacity building programme,” he said.
Capacity building
As part of the reinforcement, the Federal Government has also increased insurance cover for agric primary producers from 500,000 to 3.8 million.
To make this happen, local and international partners will train insurance experts that will midwife the index based agricultural insurance introduced by the government.
Technological input
According to the Managing Director, NIRSAL, Mr. Aliyu A. Abdulhameed, the organisation is currently in talks with Royal Exchange Assurance, NIMET and CELLULANT for the development of a technology-driven Hybrid Index Insurance product that will include the Area Yield Index, Weather Index, and Price Index Insurance.
The organisation is also exploring innovative insurance products for livestock to help stem the tide of herdsmen and farmer clashes. Acre Africa of Kenya is a major partner in this initiative, he added.
Previous commitment
Prior to current development, a former Minister of Agriculture and Rural Development, Dr. Akinwumi Adesina, had announced the approval of $5 million by Federal Government to enhance the activities of NAIC for adequate crop and livestock insurance, a gesture that was meant to support NAIC’s institutional reforms, strengthen operations and roll out of agricultural insurance products.
He said the government understood the importance of risk management in agricultural investment, therefore decided to build its capacity and prepare it to effectively meet the insurance needs of the agricultural sector.
“As we continue to modernise the agricultural sector, we will ensure that farmers are protected from the effects of climate change. The devastating flood of 2012 was a wake-up call for the need to develop policies and risk transfer systems to protect government and farmers from effects of climate change,” the minister said.
He directed that NAIC ensure that it worked with global reinsurance companies to make agricultural insurance in Nigeria of global standard.
According to him, “Government is supporting the development of weather index insurance products for farmers, improving access to climate information and expansion of agro-meteorological stations. Both agricultural insurance and reinsurance are being rapidly developed.”
Although NAIC had been in existence for long, a number of Nigerian farmers have failed to take advantage of the benefits due mainly to ignorance.
Expert opinion
A practicing farmer and the Public Relations Officer, National Cashew Association, Mr. Anga Tonya, confirmed this, as he blamed the poor utilisation of agric insurance on ignorance on the part of the farmers.
Tonya in a chat with New Telegraph described agric insurance as the best form of support for farmers to recoup their investment in the case of losses.
He, however, attributed the low level of patronage among Nigerian farmers to ignorance and poor push by the underwriters.
He said: “Agric insurance is very good. Over the years, farmers have not utilised crop insurance adequately and as a result, they suffered colossal losses. The reason actually is due to ignorance and that is still the same reason a lot of farmers are not involved in it.
“Another reason is the cost implication. Most of the farmers don’t know what it costs. They think it is very expensive whereas it is something they can afford if only they take time to find out.
“I believe the best thing to do, moving forward, is to sensitise farmers on the benefits. Basic knowledge and information would make a lot of difference. When they know it will protect their interest and crop, they will go for it.”
He, however, urged other insurance companies involved in agric cover to come out and do their job instead of leaving the whole thing for NAIC.
“The opportunity in agric insurance is huge but practitioners should work hard to fill the knowledge gap. The insurers should also design specialise products to cover agric value chain, and make noise about it because we can’t embrace what we don’t know about,” he added.
Positive direction
A former Managing Director of the insurance agency, Mr. Bode Opadokun, had said that the agency was doing so much to ensure it increased the level of penetration across the country.
He said: “We are doing this by collaborating with different associations in the agricultural sector. We are also working on having independent agents.
“I think the little challenge we have in terms of penetration among insurance practitioners is the issue of knowledge gap. You cannot sell what you don’t know. One thing about agric insurance is its peculiarity. You need the technical competence to market and underwrite this type of insurance. For instance, the exposure of the farmland to risks is different from what you see ordinarily.
“Part of what we have been able to do is empowering the intermediaries by lecturing them on the peculiarities in agric insurance. So many things have been put in place and they are all geared towards expanding the scope and reaching out to a wide range of practitioners in the agricultural sector. It is ultimately to increase penetration.

“This is an opportunity for the agric sector in Nigeria because as it is today the Federal Government is encouraging investment in agric and agric insurance has become inevitable especially now that the government is also trying to give the sector priority as a major revenue earner for the country.”
Last line
No doubt, the synergy being built by stakeholders in this respect is sure to guarantee not just food security in the immediate future by also boost the insurance industry’s premium as well as add value to the nation’s socio-economic milieu.