Leadway: Providing insurance solutions for farmers investing via Agri-Tech platforms
Mr Tunde Hassan-Odukale, MD/CEO, Leadway Assurance
Today some millennials who are not farmers are investing in agricultural value chain using Agri-Tech platforms. EDET UDOH examines Insurance solutions provided by Leadway Assurance for this category of investors.
Agriculture and economic growth
Experts in the field of Agribusiness have expressed optimism that agriculture is poised to contribute significantly to economic growth, wealth creation, employment generation, and superior food security for the Nigerian populace, noting that despite this renewed government focus, research shows that Nigeria’s farmlands remain under-utilized, with only about 41% of the country’s arable farmland currently cultivated for agricultural production.
But the good news, according to experts, is that the rapid growth and innovations in Information Technology are slowly making a strong foray into the sector, rousing optimism that we might be in for another sweeping disruption that today’s tech-based interventions are now renowned for.
To this end, Nigeria’s leading insurer, Leadway Assurance Company Limited, has designed strategic agriculture insurance solutions to take care of various risks in this segment, advising farmers thinking of investing in farming though Agri-Tech platforms to do a thorough due diligence before investing.
It also explained the level of the company’s insurance coverage under this business in order not to keep its clients in doubt, adding that the firm has entered into partnership with some digitalized agric platforms to provide second to none agric insurance solutions by providing a range of Agricultural Insurance protection to their farmers leveraging its range of agricultural insurance policies in its portfolio.
Investing in agriculture via digital platforms
Head, Agric and Micro Insurance, Leadway Assurance, Mr. Ayoola Fatona, in his papers entitled: “Thinking of Investing in Farming through Agri-Tech Platforms? We Advice You Do a Thorough Due Diligence” and “Are you a sponsor of Agri-tech platforms? Here’s the level of Leadway’s Insurance coverage” said with digital and tech-driven innovators, such as Farmcrowdy, (believed to be Nigeria’s First Digital Agriculture Platform) are able to pool more investments into the agricultural sector through crowd-funding via digital channels, networks, and platforms, stating that these innovative approaches have attracted a new crop of investors who are millennials who have tools to help them get involved in the business of farming without becoming farmers.
Mr. Fatona said with more investments, these digitalized Agri-tech platforms operated by internet-savvy agricultural entrepreneurs, are in the position to empower rural farmers by providing them with finance improved seeds, farm inputs, training on modern farming techniques and a market for the sale of their farm produce.
Leadway coverage
According to Leadway Assurance, it is critical to understand that the overarching risk that Leadway Assurance undertakes to provide cover for is the probability of financial loss which may occur as a result of unplanned and extreme events.
While responding to our enquiries to give further insight on its level of coverage for Agritech platform, Leadway Assurance explained that it only provides cover (over a particular period of time) for specified risks, e.g. Poultry risks, against insured perils (e.g. death of birds due to Fire, Flood, Diseases) as stated in the Insurance policy document issued to a farm and not on individual investor’s funds and the returns.
“The insurance contract is effected in the name of the Agric-tech platform and not in the name of the individual investor. Therefore, it’s the Agritech platform that have a right of compensation/claims recovery from the insurance contract when a loss occur, the individual investor therefore cannot claim under the policy. i.e. the insurance contract.
On whether the insurance policy does or does not cover the capital (sponsorship) as stated on the Farm’s/Agri-tech Company’s website, they stated thus “It simply implies that Leadway only provides cover for risks to the insured farm (e.g. ginger crop) against perils stated in the Insurance policy document issued to the Agric-tech Company and not on individual investor’s funds and the returns.
“Therefore, an investor cannot claim under this policy. In the event of a loss of the Agric project, Leadway’s liability is limited to the amount invested in an agric project by the Agritech platform and insured with Leadway after crowd funding from the investing public.
On whether Investor will lose everything if the crop is lost, funds and returns, Leadway answered thus “If the Agritech platform sincerely invests the investors fund in an agric project and insures same with Leadway, and the insured farm suffers a loss as a result of the perils stated in the insurance contract, Leadway will pay the benefits to the Agritech platform. It is expected that the Agritech platform will in turn pay the investors from the compensation paid to them by Leadway. If this is done, the investor’s capital to an extent is protected. It is important to reiterate that our contractual obligation is to the Agritech platform and not to the individual investors.
On if one cannot find the name of the farm one is interested in on the list but they claim they are insured by Leadway on their website, Leadway stated “Please note that if the name of the farm is not on the list it can mean: The farm is operated with an online name different from the registered business name. Please revert to the online farm to provide you with their registered business name or the farm is currently not insured by Leadway.
Responding to what does the farm property and produce insurance policy cover, Leadway stated that the farm property and farm produce Insurance covers loss or damage to agricultural produce and the property stored at the insured’s warehouse, arising from insured perils such as; Fire, Lightning, Windstorm, Flood, Aircraft,
Burglary/House Breaking, Impact, Earthquake, Malicious damage and Bushfire
A call for due diligence
Whilst these interventions provide an interesting twist to the revolution in the Agric sector, Leadway advised investors in these Agri-tech platforms to carry out comprehensive due diligence for the following reasons: that agriculture still remains a risky venture and there is a need to mitigate these risks using innovative insurance solutions, adding that with insurance policies in place, investors in all sectors of the agricultural value chains in the pre-upstream, upstream and downstream sectors are further assured of their investments.
It explained that these investors are insulated from the shock of a total financial loss arising from perils that are outside the control of the Agri-tech platforms, enjoined prospective investors to inquire about the extent of its insurance coverage for respective platforms directly from the company’s official touchpoints and customer relations channels. By partnering with these digitalized agricultural platforms, like Farmcrowdy, Thrive Agric, Agrecourse, Chubi Agro, Bush Colony, Primera Credit Microfinance Bank Limited, Winich Farms, Agrilet, Farmforte Agro, Agroyield Africa and EZ Farming, Leadway Assurance helps to provide a range of Agricultural Insurance protection primarily to their farmers leveraging its range of agricultural insurance policies in its portfolio.
Technological disruptions and new opportunities in agriculture
Speaking further Fatona said, “The rapid growth and innovation of Information Technology are disrupting how industries and businesses are structured and operated. There is practically no sector or industry that the internet-of-things has not revolutionized and agricultural sector is not left behind in this tech-driven revolution. With over 78.5 million hectares of arable land in Nigeria, the rise of digital agriculture in the country comes holding a promise to increase food production, especially with recent efforts taken by the government to diversify the oil-dependent economy with agriculture as a viable alternative.
Challenges faced by farmers
“Despite this renewed government focus, Nigeria’s farmlands remained under-utilized, as only about 41% of the country’s arable is currently farmed. Added to this, the country’s agricultural sector is dominated by smallholder farmers who face the challenge of lack of access to capital, poor mechanization, lack of knowledge of modern practices and high-risk exposure.
“To provide digital and tech-driven solutions to these problems in the Agric sector, innovators such as Farmcrowdy, believed to be Nigeria’s First Digital Agriculture Platform, sprung up. They were able to pool more investments into the agricultural sector through crowd-funding via digital channels and platforms. These innovative approaches have attracted a crop of new set of investors who are millennials. They now have tools to help them get involved in the business of farming without becoming farmers.”
Mitigating agricultural risks using innovative insurance solutions
“In spite of these interventions, Agriculture still remains a risky venture and there is a need to mitigate these risks using innovative insurance solutions. With these insurance policies in place, investors in all sectors of the agricultural value chains are further assured their investments in the pre-upstream, upstream and downstream sectors of the Agricultural value chains are insulated from the shock of a total financial loss arising from perils that are outside the control of the agric investor.
