South Africa’s agricultural sector is highly dependent on external factors such as weather conditions, pests, and market fluctuations, which can pose significant risks to farm production. This makes bespoke agricultural insurance for small, medium, and commercial-scale farmers so crucial.
Land Bank Insurance Company is on a mission to offer customised insurance solutions to help farmers mitigate risks and support sustainable agricultural practices.
In an interview with Food For Mzansi, Pascal Siphugu, managing director of Land Bank Insurance Company, shares that their mandate is to identify market failure, transform the industry, and find insurance solutions to mitigate risks for their clients.
Duncan Masiwa: 100 days into the job, how are you experiencing it so far?
Pascal Siphugu: It’s been great and certainly very informative, I have spent the time meeting with industry stakeholders and getting to understand the sector and all the current and future challenges and opportunities. With that in mind, we have started thinking about what the next five years are going to look like for us and the contribution we can make to help grow the sector.
The Land Bank insurance has such a big legacy; the business is more than 60 years old. We are a trusted and reputable insurance company in the agriculture industry offering a variety of insurance products such as credit life, crop insurance and agricultural assets insurance.
So, we would like to leverage the customer insights and customer data points we have amassed over the years to develop new and bespoke solutions to the different farmer segments of the market.
I think there is an opportunity for us to differentiate and align our product propositions to the different market segments i.e. emerging farmer, semi-commercial, commercial and mega commercial. So that is going to be an important focus area for us.
The different segments we find, face different challenges. Climate change and other weather related perils impact everyone but it affects the different segments, differently.
Mega farmers and big commercial farmers already have some form of capacity to mitigate risks, but the smaller farmers need a lot more support. So, we have to develop products that are fit for purpose and affordable at the same time so that in the event of excessive damage, they are able to bounce back and prepare for the next agricultural activity on time, whether it’s the planting or harvesting season.
As an insurance business, we have to position our solution to support farmers in a way that is different and aligned with their needs.
Many small and medium-scale farmers avoid agricultural insurance, why is that and how do we fix it?
This is mainly due to lack of awareness and insights into insurance product offerings, LBIC will be focusing on client education going forward. Of course, affordability is always an issue and we will address this by introducing relevant products like index insurance which are quite popular in other developing markets and mainly targeted at emerging farmers.
If you take the entry-level farmers, as an example, client education is needed around the role of insurance and what additional risk mitigation interventions they can put in place to ensure insurance cover is affordable.
Our message is that farmers should rather buy limited insurance cover they can afford than not having insurance at all. That way, they can still bounce back and have business continuity such as plant the next season if damage to crop occurs.
There are a lot of agricultural insurance companies out there, what sets yours apart?
No one has the legacy that we have. But we are also mandated by the government to support the sector. What that means is we are able to create bespoke solutions that our competitors can’t because we are not in this for profit.
The kind of innovation that we can bring, our competitors can’t because they will be looking at the profit margin. Of course we still have to be sustainable, but our mandate has more to do with providing risk mitigating solutions to ensure food security. The market will definitely see more innovative solutions from us going forward
Where do you see agricultural insurance 10 to 20 years from now?
South Africa has historically been slow in embracing insurance solutions and therefore penetration is relatively low compared to other developing markets. However, I think that climate change is creating awareness that farmers cannot go without insurance due to the risk of loss.
So, I expect insurance penetration to increase substantially as farmers start worrying about the impact of climate change on their operations. Climate change on its own is going to create demand for insurance.
As an industry, our job will be to make sure that the solutions that we make available to the sector are fit for purpose and affordable and that we invest in client education to ensure our products are understood.
What’s your message to farmers on the importance of agricultural insurance?
My advice is that farmers must always speak to their broker and get advice on what insurance they need. It is important that farmers understand what is out there. Don’t try and advise yourself, go to experts who can advise you. Agriculture insurance is quite complex, so you always have to get advice from somebody who’s highly skilled like your broker.
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