‘Improved subsidy for agric insurance would enhance sector capacity’
With recent expansion and new investments in the agricultural sector requiring increased capacity for agric insurance, the role and capacity of the Nigerian Agricultural Insurance Corporation (NAIC) has been brought under the spotlight. Bode Opadokun, chief executive of the government-owned establishment, in this interview with MODESTUS ANAESORONYE bares his mind on what can be done to enhance insurance sector role in agricultural sector development.
NAIC’s underwriting capacity
Absolutely, NAIC has the capacity to provide insurance cover to all the agricultural risks in Nigeria. The factors that make this assertion possible include the strong financial strength to provide coverage for these risks. Presently, the Corporation which is fully capitalised, has an authorised share capital of N3 billion and a paid up capital of N2.5bn.
Our shareholders fund stands at N5.8bn. We maintain an operational presence in all the 36 states of the Federation including the FCT. In view of the peculiarity of our operations, plans are underway to recruit agents and representatives at each local government in the country in order to meet the risk management needs of the farmers at the rural level.
With over 23 years experience in agricultural risks underwriting, NAIC has substantial experience in the agricultural sector to fully understand the dynamics of the risks inherent in the sector and proffer the appropriate risk management solutions.
The Corporation has the ability to combine innovative agricultural insurance product offerings with intensive marketing. Presently, we have in our product portfolio series of agricultural insurance policies that mitigate risks across the entire agricultural value chain. These policies, which are customer-friendly, are designed to meet the specific needs of each of the investors whether small, medium or large scale.
Recently, the World Bank adjudged our salvaged-based loss of input cost, crops insurance policy that provides multiple-peril crop insurance protection against a wide range of natural and biological perils, as one of the best in the world. This gives credence to our ability to provide customised products and services to our wide range of customers at minimal costs.
We have in our human resources pool, competent, experienced and highly motivated professionals in the field of agriculture, insurance and risk management. These includes animal scientists, agronomists, veterinary doctors, chartered insurance practitioners, etc that uses modern technology in the design and deployment of our agricultural insurance policies.
The provision of adequate reinsurance covers for our portfolio of agricultural risks by reinsurance companies of international repute both in Nigeria and abroad.
However, this does not mean that other underwriters are not welcome as this will further increase the available capacity for agricultural sector. Without subsidies, agricultural insurance premiums more accurately reflect the cost of the risks and farmers are usually scared of buying the products. Most farmers are of the opinion that insurance premiums are additional inputs costs which needed to be avoided.
Since the inception of the agricultural insurance scheme in Nigeria in 1988, farmers have enjoyed a 50percent premium subsidy from the Government on both food crops and non-commercial livestock items.
In spite of this, some farmers still complain of the high cost of procuring agricultural insurance policies. Most of them do not willingly purchase insurance unless when it is made mandatory during the process of obtaining agricultural credit. In other economies like Indian, where the uptake of agricultural insurance is on a large scale, farmers enjoy a subsidy regime as high as 80 percent.
Premium subsidy
To enable the scale up of agricultural insurance policies in Nigeria further, premium subsidy from the Government is advised for the Nigerian farmers and paid promptly. Historically, subsidised agricultural insurance schemes have been used in many countries as part of their welfare programs and these programmes have often been politically expedient and popular. With subsidies, the farmers are able to engage in a higher level of production with a reduction in investment risks.
Expansion of the role of agricultural insurance
To expand the role of agricultural insurance in agric business, the greatest incentive for farmers in having access to agricultural insurance and expanding its role in agric business is to integrate agricultural insurance as a risk management activity into the country’s agricultural programs. Anchoring agricultural risks management activities within the government programme is critical so as to ensure adequate security for farmers in case of any form of loss or disaster.
Even though, it takes time for farmers to understand the nature, role and advantage of agricultural insurance, efforts should always be made to raise the insurance awareness amongst them and would -be investors.
This will be done through sensitisation, seminars and workshops on continuous basis in order to encourage them participate in agricultural insurance. government at the two tiers ie federal and states should continuously fulfil their premium subsidy obligations to the Corporation so as to ensure that adequate reserve is maintained for the risk associated with the sector.
Grassroots insurance professionals should master not only theories about agricultural insurance but also related knowledge about agricultural management, and provide services like consultation and supervision on policy holders disaster prevention and reduction.
The application of premium subsidies for agricultural insurance products have always been a great incentive to farmers. The continued provision and prompt payment of premium subsidies will surely lead to the expansion of the scope of agricultural insurance business and encourage a high level of product acceptability.
Our experiences have shown that many farmers would not have been able to enjoy the benefit of agricultural insurance if the premium has not been subsidised. The sustenance of the existing subsidy regime when paid promptly will serve as an incentive to farmers and all would-be investors thus increasing food production in Nigeria.