Insurance

5% of farmers in Uganda have agricultural insurance – IRA

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A study conducted by the Insurance Regulatory Authority (IRA) across 18 districts in Uganda has revealed that a significant proportion of commercial farmers, who have the most to gain from agricultural insurance, have not even heard of it. This knowledge gap translates into a mere 5% of sampled farmers who have active insurance policies.

Agriculture contributes 24.1% of the gross domestic product (GDP), 33% of export earnings, and about 70% of employment. Yet the uptake of agricultural insurance is low in Uganda, reported the news organisation New Vision Online.

John Makosya, a senior consortium officer at Agro-Consortium Uganda, said, “As a cornerstone of Uganda’s economy, agriculture’s inherent risks necessitate effective risk management strategies. But despite the potential benefits, the current penetration of agricultural insurance remains staggeringly low in Uganda, covering less than 1% of the farming population.”

The IRA points its fingers at the existing distribution model, citing its inadequacy in reaching all corners of the farming community, for the lack of awareness. This is compounded by inadequate education and limited promotion of agricultural insurance.

Agro Consortium, a coalition of 13 insurance companies in Uganda is providing agriculture insurance under the Uganda Agriculture Insurance Scheme (UAIS). The scheme attempts to bridge this gap by offering insurance subsidies to both small-scale and large-scale farmers in high-risk regions. Although the uptake of agricultural insurance among commercial farmers remains low, Mr Makosya says the trajectory of the sector’s growth is promising. He says that agricultural insurance business posted GWP of UGX19.8bn ($5.3m) in 2021 from UGX5.2bn in 2017, accompanied by a rise in the number of farmers insured, policies issued, and claims paid.

Through the consortium, the government provided UGX5bn annually to subsidise farmers. However, this money was enough in the first five years. But in 2021, Makosya said the need increased to UGX9bn, which meant there was a shortfall. Additionally, in 2022, the subsidy needed jumped to UGX10bn.

This, Makosya said, means that more farmers are realising the importance of insurance and subscribing to the scheme. However, now the farmers can’t get insured because the subsidy is not enough. The majority of farmers fall in the smallholder category, characterised by limited productivity.

On a brighter note, innovative channels have emerged as a solution, embedding insurance offerings within banks, microfinance institutions (MFIs), and savings and credit cooperative organisations, which are aligned with agricultural loans.

According to the agroeconomist, Erastus Ndege, the path forward includes simplifying enrolment processes to agricultural insurance plans and fine-tuning premium structures to ensure the broadest possible coverage.

Middle East Insurance Review

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