The Role Of Agricultural Insurance In Enhancing Agricultural Productivity

Project and Seminar Material for Insurance

The Role Of Agricultural Insurance In Enhancing Agricultural Productivity


Abstract


Insurance is needed in order to alleviate the financial losses suffered by policy holders or the general public where the liability under policy is a contingent’s one. Therefore agricultural insurance takes care of the losses suffered by the farmers. To do this very successfully by an underwriter the compensation has to be made from contribution (premium) of all parties participating in the insurance. It is the aim of this research work therefore to find out if agricultural insurance has contributes in any meaningful way to enhancing agricultural productivity. Weather agricultural insurance has actually gained acceptance by the rural farmers. If compensation and adequately paid when losses are encountered by the farmers. And the possible areas the farmer can over with agricultural insurance policy the research work. Contains a general background discussion on the role of agricultural insurance in enhancing agricultural productivity. It went further to state the problem to be studies and why this research study was carried out, the scope and limitation of the study and finally the research questions and the definition of terms. AA number of related literature as it affects agricultural insurance were critically reviewed to provide enough background to the study.


Chapter One


1.0 Introduction

1.1 Background of the Study

Agricultural insurance as an alternative for risk management started as crop insurance in Europe more than one hundred year ago and then spread to the United States of America at the beginning of 20th century. It has then been embraced by a lot of the world like Canada, Mauritius, Zimbabwe, Philippines, Iran, Zambia and Nigeria with varying degrees of success and failures in agriculture production.

In Nigeria, there has been growing need since, 1976 to evolve a worthwhile and more permanent natural approach to risk management in agricultural and this has continued to attract the attention of the various governments. To this effect, Nigeria agricultural Insurance Corporation was established by funded largely by her with the predication of state government and organization private sector. Nigeria agricultural Insurance Corporation started as a company but became a corporation in 1993 by the virtue of decree 37 of 1993.

The introduction and formal lunching of the Nigeria agricultural insurance scheme by the president and commander in chief of the armed forces of Nigeria, president Ibrahim Babangida Badamosi on 15th December, 1987 was designated to benefit the small, medium and large scale farmer from the effect of natured hazards in consideration of a determined price called premium.

More so, Nigeria agricultural insurance scheme is to ensure the payment of appropriate compensation sufficient to keep the farmer in business after insuring any loss on their insured form.


1.2 Statement of Problem

In the result past, various governments in Nigeria have launched different agricultural policies in their relentless effort to enhancing agricultural productivity.

They also have committed a large sum of zealous desire to achieving an increased agricultural production but have continually and repeatedly failed. One of the reasons for this failure is that most farmers in Nigeria have never discovered the need to insure their farms and other agricultural of the federal government in establishing the Nigeria agricultural insurance scheme (NAIS).

Sourcing of fund has proved highly impossible because the lending institution also are supposed to fund agricultural development are quite doubtful of advancing loan to this sector because of the risks of uncertainty and insecurity.


1.3 significance of the Study

Agricultural insurance unlike the conventional insurance is relatively new in Nigeria. consequently, there are many problems involved in collecting data and other materials for research in the field of insurance. this problem underscore the significance of this piece of work hence, the study will be helpful to students of insurance and other interested displine who may wish to carry out further study on this new field.

The research will assist both the federal government and the Nigeria agricultural insurance corporation which are directly as the device better ways of improving their performance. this will also enlighten e various marketing intermediaries on the need to participate more effectively in the operation of the scheme to ensure it success.

Furthermore, since the scheme serve as a kind of production to the insuring public (ie the insured farmers) thereby enhancing greater confidence to all farmers) (whether insured or not) on adopting a new and improved farming practice and in making greater economy’s perhaps aids to increase the state agricultural production.


1.4 objective of the Study

  1. To investigate the number of claims that was reported to NAIC yearly.
  2. To investigate the amount paid by the farmers as premium.
  3. To investigate the performance of the relevant financial institution and agricultural lending institution on the insurance policy.
  4. The research will also check the output achieved in farming activities under the agricultural insurance scheme.
  5. To investigate the claim settlement methods and procedures of the agricultural insurance scheme.

1.5 Research Hypotheses

  1. H0: farmers in Nigeria does not subscribed to insurance policy
    H1: farmers in Nigeria do subscribed to insurance policy
  2. H02: farmers who subscribe to insurance cover do not pay the required premium
    H2: farmers who subscribe to insurance cover do pay the required premium

1.6 Scope and Limitation of the Study

Nigeria Agricultural Insurance Corporation is the only corporation underwriting all agricultural policies in Nigeria with a network of branches made the study unique. The research work carried out tend to be in dynamic setting as the scope of the work extend from the head office of the Nigeria agricultural insurance corporation in Abuja to the nearby zonal office here in Enugu. The research work covered agricultural crop, insurance product.

The volume of work local require in a research of this nature could not be carried out without some limitations. first, was inadequacy of finance, second was the death of book, journal magazine on agricultural insurance as secondary source of data collection thirdly, the illiteracy level of respondent farmers constituted serious handling and mount loss of vital information relevant to this piece of work.


1.7 Definition of Terms

The following terms used in this study should taken to mean the following:

1. Agricultural Insurance:

Is insurance cover giver to farmers or stake holders in the agricultural sector.

2. Underwriting:

It means undertaking by signing an insurance policy0 to pay damage when ever losses occur. This is done by the insurance company or society which, therefore, is called the underwriter.

3. Policy holder:

The individual or corporate body who purchase the insurance cover from the insurance company.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  1. Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  2. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to investigate the role of agricultural insurance in enhancing agricultural productivity

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of agricultural insurance in Nigeria.


5.2 Summary

Insurance and other risk transfer solutions can be part of a systematic adaptation approach and can enable vulnerable countries to better manage the new climate risks. Insurance can provide financial security against the economic impacts of extreme climate events and may for some climate change perils, be more cost effective than certain prevention measures. The combination of risk transfer and prevention adaptation measures is a subjective change that depends on policy preferences, investment choices and opportunity costs. There are three mechanisms by which insurance can be an important component of adaption. The first is by directlytransferring the risks away from the vulnerable allowing people to use insurance payouts to recover from shocks and maintain their livelihoods.

The second by allowing them to take productive risks (e.g. to take or make a loan, to invest in their own productive capacity and to develop economically). The poor are almost always the most exposed to climate impacts. They are more likely to escape poverty if they are able to better protect themselves. The third mechanism is through the signals provided by insurance pricing insurance sets a price tag on risks. If certain activities become riskier under a changing climate the insurance price will rise to reflect this risk. The place increase can incentivize change to less risks activities and to roe comprehensive risk management strategies


5.3 Conclusion

Modern technology and agricultural insurance are not mutually exclusive. Rather, they should be seen as both complementary and mutually reinforcing. This is because uncertainties in Agriculture transcends the production stage, to include special processes such as harvesting, storage, good-in-transit, pilfering and marketing (prices) because of the perishability nature of agricultural products. Nigeria has made a decent start to tackling its agricultural albeit rural problems. The macroeconomic reforms that have been instituted have elicited some modest supply response. There has been growth in the agricultural sector. The growth has touched virtually all the sub-sectors of agriculture which has lead to an increase in hectarage cultivated. At the same vein there is need for government agencies to address in fractural challenges which constrain productivity


5.4 Recommendations

Haven successfully completed the study, the researcher therefore recommends that:

Institution lenders would be encouraged to lend more for agricultural production because of added security of insurance for the loans;

Farmers will be encouraged to take more credit for increased agricultural production when provided with insurance cover against natural hazards i.e. drought, floods pests, diseases etc;

Bank loan repayment will improve because of added supervision of farmers activities by the insurance Agency and other institutions participating in the operation of the scheme;

Administration of the scheme will be made simple because:

  1. Services of existing financial institution will be utilized;
  2. Premium will be built in and deducted straight from the loan for payment to the Agency by the financial institution;
  3. Insurance contracts are made between the insurance Agency and the lending institutions rather than directly with the farmers;
  4. Indemnities are paid to the farmers through the credit institutions and
  5. Compulsion for insurance is easily enforced However farmers not taking institutional credit can avail themselves of the protection offered by the scheme.

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