Hilary Muza 
Issues surrounding The farming season is upon us. This means that various crops are now in the fields including maize and tobacco. This also means that the seasonal question of how and why one must insure their crops has to be addressed as well.
In this article, I will deal with tobacco insurance in light of the TIMB’s recent encouragement to farmers to insure their crops. This week’s article is meant to help farmers and regulators alike better understand the tobacco insurance landscape.
It is beyond doubt that there have been major shifts in the environment’s behaviour. Major wind and hail storms, floods, drought and erratic rainfall patterns have become common. Tobacco farmers now more than ever need to protect their investment against the volatile scourges of nature.
It is important to clarify, however, that farming insurance is not only the farmer’s problem. It is in the interests of all stakeholders in the agriculture ecosystem to ensure that the agri-insurance sector makes sense for all involved. For example, a tobacco contractor has to be interested in what package a loanee takes out because it directly affects their bottom line. In fact, I have in the past encouraged tobacco companies to have this baked into their contracts.
What is a crop insurance plan?
A crop insurance plan assists in the stabilization of crop production and reduces the negative impact it has on the lives of the farmers. Considering the current scenario, crop insurance has become a necessity for agricultural-related issues. It comes with advantages such as stability in income, minimizing debt where a farmer can still repay loans despite a crop failing and yield protection where a farmer is offered replant security.
What an ideal tobacco insurance package must cover
Tobacco insurance cover typically includes field to floor cover. This covers from crop from the field, that is to say insurance against the occurrence of unfavourable weather conditions, uncontrollable pests and diseases. It covers the crop in the barns where it can burn during the curing process for instance. Transport to sales floors is also covered where road traffic accidents and theft is transit are accounted for.
Tobacco insurance must encourage new technologies
An insurance provider ideally does not want to pay out on claims. It’s bad for business. One way crop efficiency can be improved is by recruiting new technology for tobacco production. For instance, new soil management technology helps farmers use the land more efficiently. Minimum tillage and crop relay methods are cases in point. New technologies are essential to ensuring better crop yields. All parties involved in the tobacco value chains from contractors to insurers must see the clear benefit that embracing new technology has on their balance sheets. In my view, however, the push to encourage the use of new technologies must come from the contractors and the insurers. They stand to benefit the most from the tobacco contract in the sense that theirs is a straightforward investment in the farmer, they do not need technical farming knowledge per se to recover a yield. It only makes sense to make the farming process for the tobacco farmer more efficient so that they increase the chances of recouping their investment.
hy tobacco insurance has failed in the past
Tobacco insurance has always been there. It has however failed in the past partly because tobacco insurers failed to engage the farmers and inspire trust. On the other hand, bankers were hesitant to offer loans and insurance to farmers because farmers simply would not bank their money. Simply put, a lack of trust on both sides is what defeated an effective tobacco insurance industry in the past. This also applies to agriculture insurance as a whole. Impasses of this nature can be avoided if tobacco insurers play a more active role in following up with their clients to see that the measures they propose in their insurance packages are adhered to. On the part of the farmers, they must do a better job of structuring their representation. A lot of farmers do not know how to access tobacco insurance products because they have not been made aware of the products and their benefits. Farmers’ unions need to do a better job of structuring themselves nation-wide so that they access and represent their constituents’ interests. If small-holder farmers are unionized and educated, their appetite for tobacco insurance might increase. Further, interaction between unions and insurers guarantees that small-holder farmers will get insurance products that are cognisant of the high numbers in the market but thin profit margins of the farmers.
Both these problems can possibly be alleviated by the recent government directive that all A2 farms are now required to hire qualified farm managers. They can be the glue that brings farmers and insurance together as they understand both the business and operational side of tobacco farming. Studies have shown that a heightened level of experience in farming increases the chances of uptake of tobacco insurance.
Collaboration between regulators
There seems to be somewhat similar goals, but a dissonant approach when it comes to regulation of the tobacco industry. On the on hand there is the Insurance and Pensions Commission (IPEC), which regulates the insurance industry. On the other hand there is the Tobacco Industry Marketing Board which regulates the tobacco industry. IPEC has made pronouncements regarding the approach it will take in facilitating uptake of crop insurance. These include micro-insurance measures that allow for easy registration to service the low-end market. Another is to encourage contractors to purchase insurance cover on behalf of the farmers. While these measures are commendable, a few problems present themselves.
Firstly, there is no evidence of any collaboration between the IPEC and TIMB in coming up with such an approach. Even if there is collaboration, it is not mandated or even actively encouraged by the law. The regulating statutes and regulations binding regulators do not give them enough leverage to take mutually beneficial horizontal measures across institutions. In anything, regulators must read into the law certain powers in order to effect change. The law, in my humble view, must be clear in giving regulators the powers to make structural and operational changes that make their work easier. A raft of changes to the regulation of tobacco are much needed and crop insurance is one of the more pivotal areas that needs addressing.
Muza is a duly admitted legal practitioner and litigation specialist. He writes in his personal capacity and is reachable at hilarykmuza@gmail.com.
