Government through Finance and Economic Development Minister, Professor Muthuli Ncube, approved the signing of the Insurance Policy Agreement and a Memorandum of Understanding between Africa Risk Capacity Limited (ARC Ltd) and the World Food Programme.
By Noah Kupeta
Information Media and Broadcasting Services minister, Monica Mutsvangwa said these are continued efforts by the government to improve food security in the face of climate change.
“The African Risk Capacity Agency seeks to provide participating member states of the African Union with access to financial resources to help them to respond to extreme weather events.
“The Agency has caused for the establishment of an affiliated financial entity, the African Risk Capacity Insurance Company Limited to provide insurance coverage, risk pooling and transfer services to ARC Member States.
“Cabinet was informed that Government, through Treasury would purchase a drought insurance premium of US$1 003 571, which will unlock a maximum coverage of US$5 345 668.00.
“Furthermore, the World Food Programme (WFP) will pay a premium amount of US$200 000 which will unlock a maximum coverage of US$1 065 329.00 for this coming 2019/20 season,” she said.
The development will likely benefit Zimbabwe in terms of ARC coverage of drought by preparing and putting in place necessary measures towards drought mitigation and early response to save the vulnerable populace.
The bold decision by the government is welcome considering the ravages of climate change affecting Zimbabwe. For instance, Zimbabwe is still experiencing the devastating effects of Cyclone Idai, which caused significant loss of lives and left about 270,000 people in urgent need of humanitarian assistance, notwithstanding widespread property and infrastructure destruction.
Most Asian countries has thus adopted weather index insurance products to mitigate such unforeseen risks and disasters.
The Insurance and Pension Commission (IPEC), following a government directive, is also working around modalities of putting in place weather index insurance. It is however critical for the regulatory board to establish a comprehensive communication strategies such as media relations to reach out to farmers in marginalised sections of society.
It is envisaged that the framework will enhance regulation of weather index-based insurance products in order to build resilience and ensure policy holder protection in the agricultural sector.
Most marginalised farmers lack financial literacy which also affect the uptake of micro insurance products in Zimbabwe.
In most cases, farmers do not understand the technical language embedded in insurance texts and discourses.
The Constitution of Zimbabwe Amendment Number 20 of 2013 recognises sixteen indigenous languages which should guide insurance players in their communication, marketing and advertising strategies.
IPEC Public Relations Manager, Llyod Gumbo, weighs in suggesting that the regulatory board introduced a Micro insurance Framework in response to farmers ‘needs in face of climate change.
“We are currently engaging technical partners to help with developing a Weather-Index Insurance Framework.
“We also partnered with the technical partners in facilitating training for IPEC and industry players on weather-index insurance and managed to send some participants to a training workshop in Senegal,” he said.
The insights are in line with Financial Re-engagement efforts by the government which has so far resulted in seven out of nine Staff Monitored Structural benchmark targets being met, including under Smart Agriculture financing.
Government recently disclosed that there is remarkable progress on the implementation of National Financial Inclusion Strategy (NFIS), particularly in areas of financial literacy, consumer protection, delivery channels, low cost bank accounts, loans to various segments, micro-insurance, micro-pensions among others.
This is despite the fact that the World Bank Consumer Protection and Financial Literacy Diagnostic Report of 2014 indicated low financial literacy regardless of Zimbabwe having a high rate of general literacy.
It is attributed to failure by most insurance customers’ failure to settle claims they cannot afford it or perceived as too expensive (68% of the time) while others claim they do not need insurance (30%); and with others indicating that they do not know how insurance works (10%).
Research by the 2014 FinScope Consumer Survey revealed that 23% of Zimbabwe’s adult population was financially excluded while 30% of adults in Zimbabwe have some kind of financial product covering risk; mainly driven by funeral cover or insurance (77%).
