Insurance for Farmers in Kenya

Written by Wellington Ayugi

Agriculture is an important economic activity in our country. It has become a very common business venture in Kenya.

Running a farm as a business entity takes a lot of hard work, and like any other business, it is also susceptible to various risks.

Whether your farm is a business or personal venture, it still needs to be protected against these risks and this can be done with insurance.

There are special kinds of insurance policies that have been designed to cover farms and farmers against the risks they face.

Some of the risks farmers face include droughts and floods. These can cause farmers to lose a lot of their productive assets. Some farmers may even take many years to recover and others completely become destitute.

Especially when running the farm as a business these losses can seriously affect the cash flow of the business and sometimes may even take many years to recover fully.

In Kenya’s PPP sector, there have been some developments that have been made where crop farmers growing maize and wheat can insure themselves with an Area Yield Index Insurance.

With this program, small farmers insure themselves against extreme weather, using their mobile phones. The program also uses crop-yield data, statistical sampling and GPSD tracking.

The farming areas are divided into insurance units and when average production in one unit is too little, all insured farmers in that unit get a payout. It was piloted in 3 of Kenya’s 47 counties and aims to extend to 33 counties by 2020.

The good news is the fact that many insurance companies are also starting to embrace the idea of insuring all types of farmers not just large commercial entities.

What Is Farm Insurance?

This is a special enterprise risk management tool that is geared to covering losses caused by wildlife and adverse weather conditions affecting your farm.

In the past, this type of insurance was mostly used by commercial large scale farms because they had very high premiums.

But today, small-scale farmers are also embracing farm insurance to protect their livestock and crops. Improved technology and funding have contributed to lower premiums, therefore, making it affordable to small scale farmers.

How Does Farm Insurance Work?

There are two main approaches to livestock and crop insurance:

  • The farmer and the insurance provider come to an agreement on the expected yield per acre of crops to be covered. Come harvest time should the crop yield be less than what was agreed, the insurer will pay for the difference.
  • The insurer covers the farmer against anticipated losses resulting from specific perils such as floods, drought, fire and so on The losses should be reported to the insurer who will then proceed to investigate the extent of the damage. Once the situation has been assessed, arrangements are made to compensate the farmer.

It is also important to note that farm insurance policies are drawn on the basis of the location of the farms, weather conditions, the quantity of produce being covered and the animal’s health history.

Common Farm Insurance Products

  1. Credit-Linked Insurance: This is designed for small-scale farmers who have loans from microfinance institutions. The policy covers the farmer’s loans for purchasing various farm inputs and tools. The policy may protect against non-repayment caused by weather related events or, a single catastrophic weather event.
  1. Weather Index Insurance: This cover uses weather data from automated weather stations or satellites to estimate the farming experience. The policyholder can choose to insure certain planting phases, the entire season or a particular set of losses. The farmer has compensated the cost of inputs if the rainfall data proves inadequate.
  1. Dairy Livestock Cover: The policy is linked to vaccines and animal care packages. It is usually offered in partnership with banks and co-operative societies. Premiums are paid in advance and deducted from farmers’ payments for milk deliveries.

There are various farm insurance schemes and pilot programs run by local companies. Some of the companies are:

  • UAP Insurance
  • Jubilee Insurance
  • Acre Africa
  • Syngenta Foundation
  • CIC Insurance

Farm insurance has led to the stability of incomes in many rural homes. This has led to a reverse in rural-urban migration as many youths are now embracing farming as a viable income activity.

There are also programs such as Kilimo Salama that have made it easy for farmers to access loans from financial institutions.

Such insurance programs are reducing dependency on the government and offering new partnerships between the private sector and farmers.

Are you a farmer in Kenya with insurance over your agricultural products? Or would you consider getting insurance? What is your opinion on the cover offered by insurance companies? Please leave us your comments below.

Learn More:

  1. Crop insurance helps Kenya’s urban poor return to farming
  2. PPP to insure Kenya’s small farmers and herders

About the author

Wellington Ayugi

Wellington Ayugi handles Business Development at Covered and has a passion for personal finance, microfinance, and developments in financial technology