To explore how governments can support efforts to scale up agriculture insurance, the ILO’s Impact Insurance Facility organised a Peer Learning Platform for Policymakers in Kenya in July. The workshop was attended by participants from Bangladesh, Ethiopia, Ghana, Kenya, Nigeria, Pakistan, USA and Zambia.
The Platform enabled members from government organizations, ranging from ministries of agriculture and finance, social development organizations, central banks, planning commissions, insurance regulators and specialised organizations focused on agriculture of several countries, to share their experiences and learn from each other to make agricultural insurance more accessible and responsible.
The following are five lessons on how governments can improve implementation of insurance programmes to improve the livelihoods of farmers.
1) Insurance as part of agricultural policy
Government should take the strategic lead for financial inclusion and insurance for rural and agricultural communities. They should ensure that insurance is included in the national agricultural policy as a part of a broader strategy that creates capacities and incentives for agricultural risk management.
In some countries this involves the integration of agriculture insurance activities with those of microfinance institutions, rural savings and credit co-operatives and/or other suppliers of credit for agricultural inputs. By aligning the agricultural value chain with the financing value chain, it is possible for insurance to create value for all stakeholders.
In addition to accounting for the risks that farmers face, it is important to consider other adaptation measures and strategies for income generation and production stabilization, as well as roles played by others in the agriculture value chain.
2) Government as driving force of market development
Governments can drive market development of agricultural insurance by assisting nascent programmes to move from pilots to maturity. Governments acting as independent and credible facilitators can enable market-based solutions by:
- Building data and making it publicly available: Accurate, affordable and accessible data is critical for developing relevant and scalable products.
- Providing distribution and claims support: There is a need to develop the capacity of extension workers to understand and promote index-based agriculture insurance programmes.
- Providing subsidies for cost reduction: In addition to premium subsidies, governments can fund infrastructure (weather stations for example) development or create customer awareness and educate farmers on enrolment, premium payments and claims processes.
- Reinsuring risk: Governments can also act as a reinsurer by providing a stop-loss fund, which enables regional institutions to understand the risk, and covers losses that go beyond a predetermined threshold.
3) Rural insurance markets incentivised
Public policy and regulation can be used in a way that helps governments facilitate development of rural insurance markets, for example through a facilitative tax and regulatory interventions, and by protecting the interests of the consumers. Some governments have attempted this by removing the tax on agriculture incomes (as in India) or by reducing or removing the value-added tax on insurance premiums (as in Uganda and Rwanda).
4) Different government levels – same goal
As diverse ministries, as well as different levels of government (central, state, district) are involved in the subject, there is a need to improve coordination and better define their roles.
Experience from the R4-Integrated risk management program from Ethiopia, Malawi, Senegal and Zambia highlighted the need for having government buy-in from the very beginning, so that there is greater ownership by policymakers, not just at the federal level but also local government officials. One of the insights from the Kenya Livestock Insurance Programme (KLIP) was that closer cooperation between the state and central governments is needed.
5) Cooperation with private sector
Policymakers need to explore ways to improve the interaction between government programmes and the private sector. The private sector can effectively assist in implementation of government programmes, for which they can leverage the agriculture extension services for education campaigns and redress for consumer grievances.
For instance, in Kenya’s Livestock and Crop Insurance Programmes, the private insurance and reinsurance companies develop and market the insurance products, carry the risk and provide compensation in case of losses, while the government focusses on data management, farmer mobilization, capacity development, subsidies, and developing the policy and regulatory framework.