Farmers in areas with high risk of drought and pest infestation recorded low uptake of crop insurance cover over the last one year, citing high charges on premiums, according to new research findings.
Scanty information on production levels and a measure of severity of Weather in the areas also compounded the woes of small-holder farmers in maize-producing regions.
Egerton University research arm, Tegemeo Institute of Agricultural Policy and Development said complexity in how new index-based weather insurance works has made crop insurance unattractive.
“Farmers confidence in crop cover has been eroded since majority are not sure whether they are liable to compensation,” said Tegemeo Institute researcher, Erick Mukandi.
While index-based insurance is used to compensate farmers in the event of loss, compensation is awarded against a shared risk, making it complicated for smallholder farmers.
A draft index-based insurance draft policy published in June indicates that a policy holder and insurer will enter a contract that should use an index that is easily observable and measurable and the value of which is objectively and independently verifiable.
“This is to build trust that the pay-out correctly reflects the experience and resulting contractual benefit,” reads the draft in part.
It also spells out that reporting and capital requirements of insurers should reflect unique risks and nature of the products. Farmers are still exposed to vagaries of weather, with climate change predicted to significantly lower production of coffee and tea.