AN APPRAISAL OF THE INSURANCE POLICIES AND CLAIMS UNDER THE

AGRICULTURAL SECTOR IN NIGERIA

From the above title, it is pertinent to define some terms that are key,and they are;

1) AGRICULTURE: Agriculture is the art and science of cultivating the soil, growing crops and raising
livestock. It includes the preparation of plant and animal products for people to use and their
distribution to markets. NATIONAL GEOGRAPHIC SOCIETY

2) INSURANCE: Insurance is a means of protection from financial loss. It is a form of risk management,
primarily used to hedge against the risk of a contingent or uncertain loss. An entity which
provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A
person or entity who buys insurance is known as an insured or as a policyholder. The insurance
transaction involves the insured assuming a guaranteed and known relatively small loss in the form of
payment to the insurer in exchange for the insurer's promise to compensate the insured in the event
of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and
usually involves something in which the insured has an insurable interest established by ownership,
possession, or pre-existing relationship. WIKIPEDIA.

Insurance can also be defined as an arrangement by which a company or the state undertakes to
provide a guarantee of compensation for specified loss, damage, illness, or death in return for
payment of a specified premium. OXFORD DICTIONARY.

3) POLICIES: A policy is a deliberate system of principles to guide decisions and achieve rational
outcomes. A policy is a statement of intent, and is implemented as a procedure or protocol.
WIKIPEDIA.

4) CLAIMS: a demand or request for something considered one's due. OXFORD DICTIONARY.

OBJECTIVE OF AGRICULTURAL INSURANCE

Agricultural insurance protects against loss of or damage to crops or livestock. It has great
potential to provide value to low-income farmers and their communities, both by protecting farmers
when shocks occur and by encouraging greater investment in crops. Agriculture plays a vital role in
the Nigerian economy and a critical source of growth in many developing countries. It is also a means
of livelihood for rural populace and a source of investment opportunities for the private sector.
However, Agriculture is exposed to adverse natural events, such as drought, flood, windstorm, pest,
diseases etc. The impact and economic costs of such disasters may increase further in the near future
because of climatic factors occasioned by climate change. These events, in most cases can lead to
impoverishment of farmers if not checked or controlled.
 Agricultural Insurance is a veritable tool that Agricultural producers can use to mitigate and manage
the risks associated with adverse natural events and disasters. Agricultural Insurance is important to
Nigerian farmers in view of its role in Agricultural development as it complements and enhances risk
management activities. In recognition of the specialized nature of agricultural Insurance, the Federal
Government established the Nigerian Agricultural Insurance Scheme (NAIS) which is implemented and
managed by the Nigerian Agricultural Insurance Corporation (NAIC).

The Corporation is to implement, manage and administer the scheme, offer protection to the
farmers from the effects of natural hazards, ensure payment of appropriate compensation sufficient to
keep the farmers in business after suffering a loss, promote Agricultural production and encourage the
flow of Agricultural credit facilities from banks and other lending Institutions to the farmers. NAIC
products and services have grown with time due mainly to the yearnings of our clients, Government
policies and increased Agricultural activities.

In Nigeria, prior to the establishment of NAIC ( Nigerian Agricultural Insurance Corporation),

Nigerian farmers suffered various losses on their investment and had no means of going back to
production. The frustration made them to move into cities in droves in search of easy means of
livelihood. This situation led to depletion of farming populace, which was a serious threat to food
security. The Federal Government was disturbed by the ugly trend, hence the establishment of NAIC to
address the need of farmers.

The need for a specialized Agricultural Insurance Company to provide insurance cover to
farmers was informed by Government's concern over the vacuum created due to the unwillingness of
conventional Insurers to accept Agricultural risks, which they considered too risky.

This led to the establishment of the Nigerian Agricultural Insurance Scheme on 15th of
November, 1987.The implementation of the Scheme was initially vested in the Nigerian Agricultural
Insurance Company Limited, which was later incorporated in June, 1988 but later turned into a
Corporation in 1993 by the enabling Act 37 of 1993. Nigerian Agricultural Insurance Corporation is
therefore a wholly-owned Federal Government of Nigeria insurance company set up specifically to
provide Agricultural risks insurance cover to Nigerian farmers.

NAIC products and services can be broadly classified into three (3);

~Agricultural Insurance Policies

i). Subsidized Crops

ii). Subsidized Livestock

iii). Commercial Crop

iv). Commercial Livestock

v). Multi-Peril Cover (MPC)

vi). Farm Assets and Investments

~General Insurance Policies

i). Fire and Special Peril

ii). Motor Insurance (Private and Commercial)

iii). Burglary and House Breaking

iv). Group Personal Accident (GPA)

v). Workmen’s Compensation Insurance

vi). Consequential Loss Insurance

vii). Money Insurance

viii). Fidelity Guarantee Insurance

ix). Plant All Risk (PAR) Insurance

x). Marine Cargo/Marine Hull Insurance

xi). Personal Indemnity Insurance

~Risk Management/Farm Advisory Services

BENEFITS OF NAIC AGRICULTURAL INSURANCE COVER TO FARMERS

Agriculture in Nigeria is highly susceptible to risk like drought, flood, pest diseases etc. Thus it
becomes necessary to protect the farms from natural and non-natural calamities, secure farmers’
investment, ensure food security and inflow of credit from lending Institutions. It is for these
reason the Federal Government of Nigeria established Nigerian Agricultural Insurance Scheme (NAIS)
implemented by Nigerian Agricultural Insurance Corporation (NAIC).

Benefits of NAIC Agricultural Insurance cover to farmers include but are not limited to the following:

1. NAIC Insurance Cover is for All Farmers

The NAIC Agricultural Insurance cover is designed for all categories of farmers namely; small, medium,
or large scale. These farmers can either be in groups, Cooperative Societies, individuals or corporate
entities. Therefore, NAIC Insurance cover is available for all categories of farmers irrespective of the
farm size, financial strength and Agricultural enterprise.

2. NAIC Cover Targets Rural Farmers

The Nigerian Agricultural Insurance Scheme targets rural farmers irrespective of their farm size and
number of livestock.

3. Geographical Spread and Accessibility

The Corporation can be accessed in all parts of the country with ease. The Corporation has its Head
Office in Abuja, Six (6) Zonal offices in Asaba, Bauchi, Ibadan, Katsina, Minna and Owerri, and Branch
offices in all the Thirty Six (36) States of the Federation.

4. Peace of Mind

The NAIC Agricultural Insurance cover offers protection to the farmer from the effects of natural
disasters by providing peace of mind that in the event of any insured loss, NAIC will offer appropriate
compensation sufficient to keep the farmer in business after sufferingsuch a loss.

5. Increased Agricultural Production

Basically, as Agricultural Insurance cover provides compensation for financial losses incurred as a
result of natural disasters, farmers have increased confidence to invest more in Agriculture with
consequent increase in Agricultural production.

6. Collateral for Loans

The NAIC Agricultural Insurance cover assists farmers to obtain Agricultural loans from Banks and
other lending Institutions.

7. Increased the Flow of Agricultural Credit

There has been increased lending to Agriculture over the years as a result of NAIC Insurance cover.
Lending Institutions have confidence to disburse more funds for Agricultural production.

8. Multi- Peril Cover

Generally Agricultural insurance crop policies all over the world cover a single peril. However NAIC
operates a multiple peril crop policy, providing cover for the following risks: fire, lightening,
windstorm, flood, drought, diseases and pests in one policy. This feat has received commendations
from highly respected International Institutions.

9. Provision of Customized Insurance products

NAIC agricultural insurance cover can be customized or tailor-made to suit the specific needs,
yearnings and aspirations of farmers and agricultural investors.

10. Premium Subsidy

NAIC agricultural insurance premium rates are subsidized to the tune of 50% by both the federal and
state governments where projects are located. Therefore the farmer pays only 50% of the calculated
premium.

11. Financial Stability for Farmers

NAIC’s claim compensation stabilizes farmers financially, particularly during disasters, which in the
long run ensures financial stability in the Agric. business sector, since losses due to natural hazards are
indemnified.

12. Adoption of Farming practices/ Techniques

NAIC agricultural insurance cover gives the farmer a greater confidence in adopting new and improved
farming practices and techniques which lead to greater investments in agriculture for increased
output.

13. Reduce Reliance on Government Assistance

NAIC agricultural insurance cover reduces farmer’s reliance on Government for ad-hoc assistance
during natural disaster which in most cases may be inadequate.

14. Risk Management / Farm Advisory Services

The corporation has experienced professionals in different areas of agriculture and insurance who
provide risk management and farm advisory services to farmers free of charge in form of extension
service, counseling and general risk improvement / measures which add value to their agricultural
activities.

15. Prompt Response and Claims Settlement

The Corporation is currently one of the few insurers that can boast of having a clean and impressive
record on claim settlements. In NAIC, claims are paid to farmers promptly and unfailingly.

Agriculture plays a significant role in the Nigerian economy. Farmers play pivotal role in the success or
failure of the agricultural industry, but are the ones suffering from loads of debts, poverty and natural
calamities that ravage their agricultural enterprises. Benefits accruing to Nigerian farmers are
innumerable under the Nigerian agricultural insurance scheme (NAIS) which has evolved to provide
benefits to farmers. The corporation therefore has over the years achieved its main objective of
addressing agricultural production risks by way of providing protection to farmers and ensuring
payment of indemnity from natural hazards. Finally, all are enjoined to key into the Nigerian
Agricultural Insurance scheme by insuring with NAIC.