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)