Over 80 years in the Kenyan market

1. What is needed to make agriculture Insurance initiatives widely available to farmers in East AfricaIsaac MaginaDecember 6th 2012

2. Over 80 years in the Kenyan market About UAP

3. About UAP

4. Why Agriculture Insurance? In the midst of catastrophes!

5. Importance of Agriculture Agriculture is an important economic sector and a source of livelihood in many developing countries. Majority of rural households in the region depend on agriculture to earn a living Agriculture can contribute to faster growth and reduction in poverty levels. GDP growth in agriculture is more effective in reducing poverty compared to non-agricultural GDP growth Effective risk management models in agriculture contributes to an increase in agricultural productivity. Farmers can invest in new farming technologies once they are sure that their investments are secured.

6. Agriculture production volatility • While climate change scenarios can be predicted, it is difficult to forecasts future volatility in i.e. production or animal disease trends. • Volatility is a key element in the agriculture insurance; Risk profiling has a high impact on future premium rates • Research • Improved technology • Extension Servies • Finance yield/ha • Climate change • Lack of water • Soil degradation time

7. Some of our projects in the past five years Index based Livestock insurance-IBLI • Pilot project to insured pastoralist in Marsabit County Northern Kenya in partnership with the International Livestock Research Institute and Equity Bank Index based Crop Insurance Initiative- KilimoSalama • In partnership with Syngenta Foundation for Sustainable Agriculture, Currently insuring over 65,000 small holder farmers in Kenya and Rwanda East African Barley Crop Insurance scheme • Crop insurance scheme for contracted barley growers in 2010/11 crop season

8. Some of our projects in the past five years Sugar Cane Fire Insurance Scheme • In partnership with the Kenya Sugar Board and Agriculture Finance Corporation Kenya Commercial Bank Livestock Insurance Scheme. • Livestock insurance for all dairy development loans advanced to KCB customers Tobacco Crop Insurance Schemes, • Crop insurance cover for farmers contracted by the major tobacco processing companies

9. What we have found out?

10. Farmer’s trust in insurance needs to be built Survey of farmers who received a pay-out showed clearly that until pay-out, farmers do not trust insurance Eunice Wamaitha, 1 Acre insured What did you think about insurance before the payout? I thought they might not pay, our friends told us after the training that we were being lied to What did you think about the insurance after the payout? I was happy and told others I have been paid Low retention levels even where a payout has been made in retail accounts and High retention rates in Corporate accounts tend to have high. Farmer education key in managing expectations

11. Training is key to uptake and satisfaction

12. Affordability is key: willingness vs ability to pay

13. Unique distribution models

14. Key Lessons-General Product training • Farmers are excited but skeptical about insurance • Generally low uptake insurance products less that 2.5% Marketing and distribution channels • Existing distribution channels (i.e. brokers, agents etc) are not used to dealing with farmers (large & small). • There is a perception that Agriculture insurance is complicated to sell.

15. Key Lessons-General The Product • Indemnity based vs Index Insurance Products. • Livestock insurance indemnity vs Index based • Adoption of suitable weather proxies for agricrisks e.g. NDVI, CCD or ET indices Weather data/ infrastructure • Insufficient historical weather data, small number of automatic weather stations and weather data analysis. • Role of Meteorological services; business vs regulatory

16. players in agriculture insurance market. • Farmers and farmer organization; need to understand attributes and benefits of agriculture insurance products • Insurance company; caries the risks and product development champion. • Re-insurance; support in product design, market development, global experience and carry the risk • Insurance distribution- Brokers, Agents, Baccasurance, Farmers association and co-operative societies • Financial institutions; banks, micro finance, development banks-to provide agri-credit and pre-finance premiums • Development agencies; non governmental organizations in product development and marketing • Government and Government agencies; policy formulation, regulation, market development and insured • Research institutions: product design, service providers

17. models of government support to agric insurance • Normally High Penetration (compulsory) • Well Diversified Portfolios • Social over Technical criteria • Monopoly. Issues with the service • Government assumes full liability Fully Intervened System • High Penetration • Well Diversified Portfolios • Technical over commercial criteria • Competition for service • Government adds stability to the system • Private Sector adds “know how” Level of Government Intervention Public–Private Partnership • Low to moderate penetration • Low risk diversification • Commercial over technical criteria • Competition for price Pure Market Based Number of Players Product Diversification

18. UAP, Bishops Garden Towers, Bishops Road, PO Box 43013-00100, Nairobi, Kenya. Tel 2850000, Fax 2719030, E-mail uapinsurance@uapkenya.com www.uapkenya.com