By JOWIT SALUSEKI –
SMALLHOLDER farmers especially in Zambia face myriads of climate hazards.
From droughts to floods, peasant farmers’ are at risk of losing out as they fight an invisible ‘war’ against changes in climatic conditions.
But distrust in insurance products, lack of education on insurance cover and an unattractive insurance policy by providers has reduced agricultural insurance demand among farmers.
This is despite agricultural insurance increasingly being promoted to provide relief in an event of climate vulnerability.
However, various surveys indicate that take-up of agricultural insurance in most farming communities in Zambia remains the lowest.
Instead, smallholder farmers continue to rely on less effective mechanisms such as asset depletion or dependency on few surviving livestock and  meagre savings even when insurance options are available.
Agricultural insurance remains unpopular, unattractive and poorly demanded by a majority of farmers in low- and middle-income farming areas across all the 10 provinces of the country.
This is despite the evidence of its potential in improving farmers’ and pastoralists’ livelihoods, unlocking investments in production and eventual poverty reduction.
Agriculture insurance covers livestock, poultry, loss of crops and stacks, among others.
Some school of thoughts alludes to the fact that the only way to attract more clientele is to make insurance cover affordable to smallholder farmers.
In Zambia the majority of commercial farmers are the ones who have invested in insurance cover.
These are mainly those practicing large scale farming in communities such as Mkushi, Serenje , Mazabuka, Chisamba , Chibombo , among others.
Others are individual commercial farmers dotted across a few rural areas of the country.
For instance currently, some parts of the country such as Southern, Western,  Copperbelt , Lusaka  and Central are grappling with floods while other areas such as  parts of Northern , Muchinga and Eastern  are facing serious droughts.
Riding on this scenario, experts say there is a need for insurance companies to come up with various strategies to be employed to spur its take-up among peasant and livestock farmers.
Agriculture expert Lusekelo Mwanza said there is a need to reduce the cost of delivering insurance in order to attract peasant farmers.
“Whereas other kinds of insurance such as health or motor insurance have a concept of self-protection such as better use of preventive health services or more disciplined driving which in turn might lower premiums, farmers do not have much leverage over the weather.
Moreover, climate change increases the frequency and intensity of weather-related risks, and most shocks are covariate in nature. Agricultural insurance, therefore, becomes a high-frequency, high loss insurance type making it more complicated than other kinds of insurance,” he said.
Mr Mwanza said the cost of commercially viable agricultural insurance is therefore high and prohibitive to both the provider and farmers.
He added that there should be flexible payment mechanisms too in order to attract peasant farmers.
“Alternatively, insurance providers can offer flexible premium payment mechanisms, which relax budget limitations without affecting premiums.
One avenue of easing farmer budgets is by making flexible the time of payment such as pay-at-harvest.
However, the main challenge with pay-at-harvest insurance products might be contract enforcement as default rates might be high,” Mr Mwanza said.
He said some livestock farmers are discouraged to take up insurance because some insurance firms allegedly only prefer to insure animals that are above six months.
Robbie Ntambu , one of the few commercial farmers in Mwinilunga  who has embraced agro insurance said apart from coming up with incentives such as group insurance , there is need to train farmers  in communities on how to use smart technology.
“They should also be the role of Information and Communications Technologies (ICTs) in enabling farmers to utilise payment platforms. Insurance companies are often thin on the ground and not able to reach most locations where farmers are located,” he said.
He said smaller initiatives have been registered in several countries, and mobile payment could provide options to suppliers.
“However, the cost of internet services and mobile-based payment service taxes and costs remain high therefore removing or decreasing some of the costs of using these platforms might make it simpler for rural farmers to adopt such technologies,”Mr Ntambu said.
He added that most rural farmers are not only illiterate but also unaware of new technologies such as insurance.
Mr Ntambu said farmers and livestock keepers are also influenced by behavioural, social and cultural factors in their decisions to purchase insurance.
He said these factors are portrayed through risk perceptions, trust and, in some communities, cultural and religious beliefs play a role.
“Generally, risk perception can be in three dimensions, risk aversion – where individuals have a concave utility function in that as risk increases, they are more likely to adopt risk mitigation mechanisms.
Then there is risk neutrality  where individuals are indifferent to risk and risk loving  where individuals portray a convex utility function such that they increase risky ventures even when the possibility of loss is high,” he explained.
He noted that risk-averse farmers are more likely to demand insurance more than risk-loving and risk-neutral farmers.
“Risk aversion in agricultural insurance can be categorised in two aspects. The first is risk aversion towards the probability of a weather shock happening and the farmers having losses. For this kind of risk aversion, insurance is always attractive,” he said.
He however, said farmers might underestimate the probability of weather shocks and therefore demand less insurance.
An insurance expert in Ndola who preferred anonymity explained how livestock and poultry insurance cover is offered at one of the firms.
“Only horses from six months and 15 years are insured while only pigs of between two months and 10 years are insured.
And when it comes to cattle only those  of between six months and 10 years are insured  while with chickens only those of not less than 21 days are covered,” he said.
On crop insurance, the official said the insurance covers loss or damage due to fire and lightning for both irrigated and rain fed crops.
He said such crops include maize, wheat, sunflower, cotton, groundnuts, soya, beans, coffee, tea, sugarcane and tobacco.
The official said tobacco in nurseries and those less than 21 days after transplanting is not covered.
Some farmers interviewed by the author in Southern Province recently said the Government can also provide subsidies to make insurance affordable and attractive.
Those talked to in Pemba, Sinazeze, Sinazongwe , Monze and Mazabuka  areas said they were unable to get insurance cover because agricultural insurance programmes in low-income communities have no form of subsidisation.
They added that they were willing to get insurance cover on condition that insurance firms made their products affordable.
With Zambia facing droughts in some places and floods in other areas, having affordable agricultural insurance cover  among several farmers can provide  them relief in an event of climate vulnerability.