High income agriculture has grown rapidly in recent years with the
acceleration of agricultural structural adjustments. However,
natural disasters and incidents -- such as floods, rainstorms and
pollution -- often bring huge losses to the sector. Compared with
secondary and tertiary industries, agriculture's long production
and profit generation cycles mean it's easily affected by natural
conditions. Modernization and high income agriculture requires
higher investment and higher production which also results in
higher risks. As farmers' awareness for insurance increases, they
are becoming more eager for agricultural protection. Developing an
agricultural insurance system is needed to support the primary
sector and protect the interest of farmers.
Zhang Huakui opened a chicken farm in the Yuecheng District of
Shaoxing City, in east China's Zhejiang Province. He invested 20
million yuan (US$2.41 million) and introduced breeding chickens
from France. While his business was booming, a sudden power cut
caused high temperatures in the henhouses and killed 18,000
chickens, resulting in a direct loss of 1.2 million yuan
(US$145,000) and an overall loss equal to 3 million yuan
(US$360,000). Confronted with the situation Zhang could only sigh,
if only there had been agricultural insurance; yet up to now, no
companies have engaged in such businesses.
A
similar thing happened to two brothers breeding pearls in the town
of Lingzhi, also of Shaoxing City. The two brothers used their
saving of 1 million yuan (US$120,000) to contract 100 mu
(6.67 hectare) of fish ponds to farm pearls. An incident killed
200,000 mussels in one day, resulting in losses of about 1 million
yuan. They are also awaiting agricultural insurance.
Lu
Yimin, director of the agricultural economics department with the
Shaoxing government office, says these agriculturalists often met
with such suffering. Some of them arranged loans from banks while
incidents pushed them into difficulties. He added that if there
were agricultural insurance, farmers would be able to receive
direct assistance.
The insurance industry has developed rapidly and the types of
insurance have expanded quickly in recent times, but insurance is
almost completely closed to agriculturalists. Farmers long for
agricultural insurance, while at the same time insurance companies
offer no such products. What is happening here?
Insurance professionals say their companies need to consider
profits when opening up new lines of business. Agricultural
insurance is a high risk undertaking and can require high levels of
compensation which no company can afford to on its own. Branches of
the People's Insurance Company of China had such businesses in
Shaoxing more than 10 years ago, and later closed them because of
the high risks; it's not difficult to understand why new insurance
companies distancing from agricultural insurance. Even though
leaders of Shaoxing City have held several meetings urging
companies to introduce agricultural insurance products, and that
some companies have made attempts develop such products, businesses
have still been unsuccessful in putting anything into practice.
Shortcomings of agricultural insurance also hinder progress,
according to some insurance professionals. For instance, the
compensation procedures are very complex. If a fishery buys
insurances and the fish die, it's hard to identify which fish are
covered by insurance and which are not. High compensation of course
will result in high insurance premiums, which prevents farmers from
taking out insurance policies in the first place.
Chicken raiser Zhang Jianqiang lives in Shangyu City's Dingzhai
Village, Zhejiang Province. He says there are 200 families in his
village specializing in stock and crops and all of them want to
take agricultural insurance, to prevent the huge losses which can
be caused by accidents and weather disasters. Although insurance
companies are active in their village, no one offers agricultural
insurance products. Zhang added that many people support
agricultural structural adjustment and high income agriculture, but
in fact, providing agricultural insurance reduces the risk to
farmers and therefore the high profit margins they can enjoy and
which ultimately supports them.
In
some developed countries, the agricultural insurance business has
become an important measure used by governments to support and
protect agriculture. Shanghai also promulgated and implemented the
first national agricultural insurance measures, allowing the
government to employ policies and fund aid for agricultural
insurance organizations. According to the rules, Shanghai farmers
can receive subsidies equal to 25 percent to 45 percent of their
insurance premiums once they have insured their stock and
crops.
Many agricultural experts offer advice, referring to the
experiences of overseas governments to help develop agricultural
insurance. Each level of government uses macro-level adjustments
and control measures to help develop different levels and kinds of
agricultural insurance acceptable to government finance
departments, insurance companies and farmers. Some agricultural
management departments proposed allocating government funds to
building an agricultural insurance fund, which could then be used
to aid companies' excess compensation and farmers' insurance fees.
Meanwhile, special organizations are needed to help agricultural
insurance companies deliver compensation earlier to common farmers
and their families.
(china.org.cn by Feng Yikun, December 31, 2002)