How agricultural insurance can improve income and general price stability of country

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Insurance is the mechanism to manage agricultural risk particularly to safeguard farm income losses under adverse weather conditions and similar events beyond the control of primary producers.

Historically, agriculture has been subjected to various types of risks and uncertainties, which cause a major concern for producers and ultimately consumers.

 

Farmers face a variety of risks such as production risk or yield risk, market risk or price risk, institutional risk, financial and credit risk and personal risk, to name a few.

 

Being the mainstay of most of the developing economies around the world, agricultural risk possesses considerable threat to the income and general price stability of those countries.

 

Agriculture is the mainstream of most of the developing countries and it is not merely an occupation, but a way of life for the people of these countries.

 

Historically agriculture process involves various types of risks and uncertainties, which cause a major concern for producers and ultimately consumers.

 

Agricultural production is basically a risky business, and farmers face a variety of risks such as production risk or yield risk, market risk or price risk, institutional risk, herdsmen risk, financial and credit risk and personal risk, to name a few.

 

Being the mainstay of most of the developing economies around the world, agricultural risk possesses considerable threat to the income and general price stability of those countries.

 

The AmehNews recall that for the interest of general price stability for the country that central bank of Nigeria under the leadership of Godwin Emefiele has taken a giant strip in agricultural productions with intervention.

READ ALSO THIS: Agricultural Insurance Impacts On Food Production And Supply Chains In Nigeria

This unpredicted risk of agriculture cannot be mitigating fully but it can be minimised up to certain percent with the help of insurance.

 

Thus, insurance is the mechanism to manage the risk in agriculture particularly to safeguard farm income losses under adverse weather condition and similar events beyond the control of primary producers.

 

Experts are of the opinion that insurance operators should continuous with their efforts in around manage the agricultural risks through implementation of various types of insurance products.

For instance, the developing economies are changing very fast under the process of globalization, which obviously is likely to expose the agriculture sector into more market risk and therefore this calls for special attention to evolve suitable institutionalized mechanism to share the risks by key stakeholders.

 

The agricultural insurance experiences around the developing countries is essential for strategic planning of crop insurance.

 

Particularly focuses on the following areas – role, importance and progress of agricultural insurance in developing  countries; prevailing insurance mechanisms in important developing economies; experiences of some innovative insurance mechanisms; agricultural insurance as a business opportunity; role of public support policies; and role of private institutions to mitigate agricultural risk through insurance and finally few suggestions for evolving/improving strategies based on the global experiences.

 

 

However, global experiences on promotion and implementation of agricultural insurance indicates mixed results to mitigate the agricultural risks.

 

Therefore, there is a need of innovations and newer strategies to tackle the prevailing agricultural risks.

 

 

Role, Importance and Progress of Agricultural Insurance in Developing Countries

 

Natural disasters can be enormously disrupting and hit hard to farmers and also to others whose income depends on a successful crop.

 

Crop insurance is one of the most important instruments, which can help out in managing these losses, particularly covering losses from adverse climate and similar events, which is beyond the control of the farmer producers.

 

Reports indicated that agricultural insurance around the developing nations is quite under developed.

 

During 2001, total agricultural premiums (including fishery and forestry) was estimated to be US$6.5billion while the estimated aggregate value of agricultural production was US$1.4trillion.

 

This indicated that the agricultural premiums were as low as only 0.4per cent of total output.

In addition, the distribution of coverage was observed to be skewed to the developed countries, which are accounting nearly 87 per cent of the total agricultural premiums as against only 13 per cent in developing countries (Roberts, Raj, 2005).

 

Furthermore, Agricultural Risk Management and Crop Insurance Education Program helps producers address the risks that confront every farming operation. The goal is to provide useful information, resources and links about crop insurance and other risk management programs that will help farmers manage production, marketing and other farm business perils.


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