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Kenyan Farmers Bank on Data Science to Unlock Ksh3B Agriculture Insurance Businesses

Less than 5% of the Kenya farming community are insured

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The agriculture insurance sector in Kenya and the East African region is set to grow by 200 per cent, according to Allianz Africa, one of the world’s leading insurers and asset managers. It is estimated that the agriculture insurance segment’s value is to stand at $10 million and holds the potential to grow to $30 million (Ksh3.2 billion)

Allianz entered the East African market last year after signing an agreement with Jubilee Insurance to establish a strategic partnership in the five African countries where Jubilee Insurance currently operates.

The partnership covers the general insurance business in Kenya, Tanzania and Uganda, and the short-term insurance segment in Burundi and Mauritius.

They aim at partnering with aggregators such as banks, cooperatives, agro-dealers, and commodity associations to deploy the solution. 

According to our estimates, Agriculture Insurance Premium globally is USD 32 billion. East Africa contributes about USD18 million, of which Kenya is about USD10 million. Governments and the Private Sector in East Africa are working together to increase agriculture insurance penetrationLess than 5% of the Kenya farming community is insured,” said Lovemore Forichi, Senior Underwriter of Agriculture at Allianz.

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Lovermore says that Allianz aims to unlock the potential using parametric, a non-traditional insurance product that offers pre-specified payouts based upon trigger events such as wind speed and rainfall measurements.

Operationally, parametric solutions are less cumbersome as the insurance company does not need to visit the farm and occupy the farmer`s time. Monitoring of the index can be done remotely through satellite imagery and data,”

“The farmer can also have access to the data, and they can closely monitor the development of the index throughout the growing season on their mobile phone or tablet. This also makes it very transparent, traceable, efficient, and paperless,” said the official.

Through parametric, farmers can choose which parameter is of concern to them, as far as affecting their crop yield is concerned. The most common parameter is rainfall. Lack of rainfall during the cropping season (drought) and too much rainfall (excessive rainfall) greatly impact the farmers’ yield and, subsequently, the revenue.

So the farmer will choose to insure against drought and/or excessive rainfall to hedge their losses. When the insurance company uses index insurance solutions such as Rainfall Index, Evapotranspiration Index, Soil Moisture Index, and Area Yield Index, these are classified as parametric solutions.

Over the years, more insurance companies are venturing into the agricultural space as farmers increasingly understand the value of insurance as they learn from other people’s experiences.

The Kenyan government and private sector are also actively contributing to the insurance penetration through premium subsidies for both crop and livestock farmers as only less than 5% of the Kenya farming community are insured.

SEE ALSO>>>>>How to Engage, Retain Youth in Agriculture



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