Agro
based insurance covers in Kenya are still a new type of risk or rather new
class of agricultural insurance despite most insurers in the market developing insurance products ranging
from Wheat , sugarcane, sorghum, Greenhouses ,dairy cows , horses etc to
cushion the farmers against adverse losses that may arise as result of bad weather, theft , some classified diseases especially for livestock farmers ,
arsonists attacks on sugar plantations inter alia. However, since the late 2005
the uptake of the agro insurance covers in the country has largely been driven
by respective underwriters creating awareness through broad based marketing
campaigns targeting agriculturally rich counties on the merits of insuring
crops and livestock to which they have justified the same by electronically settling
insurance claims for affected policy holders a case in mind is the Jubilee
insurance company of Kenya compensating Sorghum farmers as result of poor
rainfall in kibwezi which fuels the need for farmers to engage in value based
farming devoid of acts of god.
What
most insurance players in the market have been forced to develop products in a
way that leverages their premium incomes from adverse losses by developing key control
factors for instance for wheat farmers they have a minimum requirement on the
acreage to be insured, maximum guaranteed indemnity should a loss occur; the regulator in tandem with the government
ought to devise policies, create durable infrastructural facilities and laws that will guide the growth of the insurance
sector in the country as whole without burdening the insurers in the market. This
will address the need to mitigate insurance costs usually passed over to
overseas reinsurers especially for the highly mechanized farm plantations.
Other
micro finance institutional players in the market such as KWFT have also
partnered with insurance players by offering credit facilities to Sacco’s who
in turn invest in dairy cows that are insured against death, theft and or
gestation complicated issues in this way the insurance company guarantees to
pay the farmer should a loss arise and that the micro lender is guaranteed that
the farmer is able to repay the loan taken based on restitutio integrum. Having
developed sound insurance base for the farmers opens up the farmers to another
war frontier that usually involves exploitation from middlemen and brokers out frustrate
their efforts to sell at a reasonable rate their farm produce to the specific
industries that need to process agro based produce hence a disillusioned farmer , though the
other factors stem from the inability by the factories to pay the suppliers
which arises out of fund mismanagement and or price fluctuations in the global
markets .
The
way forward to cushion the farmers from exploitation revolves around setting up
commodities futures exchange market for products such as maize, wheat, barley, pork,
sugar, coffee, tea etc such that a farmer raising wheat can sell a future
contract on his wheat, which will not be harvested for several months, and
guarantee the price he will be paid when he delivers; a breakfast cereal
producer buys the contract now and guarantees the price will not go up when it
is delivered. This protects the farmer from price drops and the buyer from
price rises. Speculators and investors also buy and sell the futures contracts
in attempt to make a profit and provide liquidity to the system. However, due
to the financial leverage provided to traders by the exchange, commodity
futures traders face a substantial risk. This will go in a long way addressing
the maize, coffee, sugar and other cartels that normally exploit farmers in the
country for political and selfish interests.
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