Allianz’s Lovemore Forichi on why uptake of agriculture insurance in Africa is low

The agriculture sector in Africa plays a critical role in the continent's economy, contributing significantly to the GDP. However, despite its importance, a large majority of agricultural holdings lack protection against climate hazards. Lovemore Forichi, Senior Underwriter of Agriculture at Allianz, highlighted the need for innovative ways of providing insurance coverage for the sector during an interview with CNBC Africa. Forichi pointed out that the global production insurance market is valued at $32 billion US dollars, but Africa's share is only $300 million US dollars, representing a mere 1% of the global market. The disparity demonstrates the underdevelopment of agriculture insurance in Africa, with penetration rates below 1%. While agriculture insurance is crucial for securing the agriculture production and value chain, there are various challenges hindering its growth on the continent. One of the key issues identified by Forichi is the low uptake of insurance among small-scale farmers. The lack of government support and subsidies for agriculture insurance further exacerbates the situation. Forichi emphasized the importance of government intervention in promoting agriculture insurance, citing successful subsidy programs in countries like Kenya, Uganda, Senegal, and Nigeria. These initiatives have helped improve the penetration of agriculture insurance and support small-scale farmers. Additionally, Forichi highlighted the role of the private sector in addressing the gap in agriculture insurance coverage. He acknowledged that traditional insurance products are more tailored towards commercial farmers due to the scale and resources required for field inspections and loss adjustments. However, he emphasized the potential for innovation in providing insurance solutions for smallholder farmers. Forichi discussed the significance of index insurance as a cost-effective and transparent solution for small-scale farmers. Index insurance utilizes technology such as satellite imagery to monitor and assess risk, enabling farmers to track their insurance index and receive payouts more efficiently. The use of index insurance and technology can revolutionize the agriculture insurance sector in Africa by providing accessible and reliable coverage for small-scale farmers. Despite the challenges and disparities in agriculture insurance uptake in Africa, there is a growing awareness of the benefits of securing farmers through insurance. By engaging with governments, private sector entities, and leveraging innovative solutions like index insurance, the agriculture sector in Africa can enhance its resilience to climate hazards and contribute to long-term food security and economic growth.