By Chiamaka Ajeamo
Given the vital importance of agriculture as a food source, especially in view of the increase in global population, there is an ever-growing need to invest in the sector yet; only a small portion of the producers are insured in Africa despite the fact that agriculture production makes up a substantial portion of the continent’s Gross Domestic Product (GDP).
Hence, raising awareness of the vital role that agriculture insurance plays in sustaining agricultural production is a key step to increasing insurance penetration in the sector. This was the consensus reached by the Chief Operating Officer, Allianz Africa, Delphine Traoré and other stakeholders who spoke at Allianz Africa Webinar with the theme: ‘Digitalisation of Agriculture Insurance through Parametrics Solution’.
Explaining Allianz Africa interest for sustainability in the agricultural sector, Traoré said Allianz Africa aims to contribute towards closing the protection gap and position itself as a leading agriculture (re)insurance provider on the continent. In addition, climate risks increase the need for investments to make agriculture more resilient.
Proffering solutions to this, the panelists agreed that the development and commercialization of agriculture requires financial services that can support it hence, agricultural insurance is strategically important for eradicating extreme poverty, boosting prosperity and protecting livelihoods.
In 2020, the insurance industry recorded a cumulative premium of $300 million from agricultural insurance. The Southern and Eastern regions of Africa contributed more than 80 per cent of the recorded premium. Eastern Africa recently recorded an improvement in its trajectory.
The Regional Head of agriculture at Allianz Re, Reto Schneider, stated that “the agricultural sector in the insurance industry could reach the potential of $1 billion within 10 years, provided that penetration can be substantially increased.”
Furthermore, parametrics solutions were presented as the direction for the future. According to the speakers, these solutions bring a number of advantages such as high accuracy with state-of-the-art satellite information, hybrid products to address additional perils, increased efficiency through fully paperless processes, and fast and automated payouts possible, high level of traceability, combination with loans and integration of the value chain.
To have a reliable parametrics system that provides efficient solutions, the panel emphasised the necessity to bring significant improvements through product suitability, affordability, value chain efficiency, distribution, information and training.
Also, despite certain limitations, “technology is closing the gap between indemnity and parametric crop insurance and allows to get the best of both worlds in a single product”, Gregoire Tombez, CEO of WARM Consulting Group Ltd and Co-founder of GreenTriangle said.