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Agricultural index based insurance under the loupe in Africa

6th June 2017 - Author: Staff Writer

The African agriculture industry is in the throngs of change surrounding the technology, regulation and distribution of index based insurance – developments which are improving the operating environment for insurers as demand for insurance solutions grows.

Loupe imageThis is according to Jonathan Dixon, Chair of the International Association of Insurance Supervisors (IAIS) Regional Committee for Sub-Saharan Africa, during comments made at the 10th Consultative Forum (CF10) on building disaster resilience of smallholder farmers through upscaling agricultural index insurance in Africa.

“These include innovations in business models, advancements in technology, the development of proportionate regulations in areas such as distribution which is critical in agricultural insurance given its long value chain, and growing support from other policymakers with pilots being subsidised and supported,” Dixon explained.

One of the issues being discussed by the IAIS drafting group on index based insurance regulations, is the different role the insurance supervisor plays in agricultural insurance programmes of various sizes, Hannah Grant, Head of the Secretariat for the Access to Insurance Initiative, explained that; “at the micro and meso levels individual policyholders are more vulnerable to abuse and the potential for reputational damage for the sector is much higher.”

Annette Houtekamer-van Dam, Microinsurance Expert at the Microinsurance Network, added that a hot topic amongst the industry in Africa is the creation of a multi-peril index insurance that combines agricultural and medical insurance “as well as the offering of insurance to multiple players along the value chain, for example for the agricultural input providers as well as the farmers.”

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Another key takeaway was the need for the insurance industry to upscale agricultural insurance through building more strategic partnerships where all value chain stakeholders stand to benefit.

“Discussions centred on striking the right balance between small frequent pay-outs, which contribute to positive consumer perceptions and create trust, and affordability of premiums and sustainability of programmes.

“In addition, the need for greater regulatory flexibility with regards to allowing client aggregators, such as agricultural input providers, to distribute the product came to the forefront.

“Finally, there is a need for better data collection and more research on the most appropriate indicators to measure risk, viability and client value,” Houtekamer-van Dam continued.

Insurers and reinsurers in Africa still face the challenges of accurate risk assessment as they innovate to offer new solutions to this growing market, but with food and water scarcity increasingly plaguing the continent and the globe, it’s clear the industry’s only scratched the surface of its potential for agricultural index based insurance to build resilience and assist in global development goals. 

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