Millions of Chinese farmers will hopefully no longer risk their fortunes on the weather or be hurt helplessly by calamities like bird flu, because the government is mulling vigorously expanding the still small-in-size agricultural insurance.

Wu Dingfu, chairman of the Chinese Insurance Regulatory Commission, said the government is exploring ways of expanding the insurance to protect its 900 million farmers from natural disasters.

He said China will highlight the promotion of commercially operated agricultural insurance with financial and policy support from the government. Some pilot programs will get underway soon in two or three provinces or cities, according to the chairman.

China's first special agricultural insurance company is to be set up and operational within the year in Shanghai. The company, with capital of 200 million yuan (US$24 million), is a landmark trial by the Chinese government to promote farming insurance.

Xu Wenhu, director of the insurance department of Fudan University in Shanghai, said the government and the insurance industry should be moved to action by bird flu, which has affected tens of thousands of farmers and ignited their demand for the farming insurance services.

But China's meager agricultural insurance services are far from as adequate as both the government and farmers desire. There are currently only two major insurance companies offering agricultural insurance in the country, namely, PICC Property and Casualty Co. Ltd. and China United Property Insurance Company. Their businesses are shrinking further over years because of loss of money.

Agricultural insurance in China is in a dilemma, according to Zhou Weiguo, general manager of the agricultural department of the Shanghai branch of PICC Property and Casualty Co. Ltd. If the commission rate was set according to the market level, most farmers were unable to afford it. If the rate was lowered to within farmers' capacity, insurers would go into the red.

The situation was worsening in recent years. A 20 percent plunge was reported in 2002 in China's total agricultural insurance revenue, the sharpest fall since 1982, when agricultural insurance was first launched in the country. The 480 million yuan (US$58 million) of agricultural premium insurance made up a poor 0.16 percent of the nation's total insurance revenue in 2002.

The following year of 2003 was no better.

The lagging agricultural insurance leaves farmers, if hit by big disasters, no other way out but to wait for government aid. The bird flu outbreak in Shanghai alone has led to the culling of 300,000 poultry, while less than 1 percent of its total 150 million poultry has been covered by insurance. Most affected farmers wait for the government's financial compensation, which is a small amount for each farmer but a big spending in total for the government.

A farmer surnamed Xu in Shanghai's Jinshan District saw his 30,000 chickens killed overnight for his farm was less than the safe three kilometers away from the bird flu site. He was paid only six yuan (US$72) for each kilogram of chicken, merely covering his cost of breeding.

"The disaster destroyed my 20 years of efforts," said Xu who has been raising chickens for over two decades. He had heard of the agricultural insurance, but opted against it because of the high commission rate and knowing little of which companies might run such insurance.

The farmer's dream of becoming rich was crushed by bird flu.

"Ignorance of insurance and commission rates higher than farmers' affordability are two major obstacles barring the development of the agricultural insurance," Prof. Xu Wenhu said.

Bird flu is just one of many disasters that rendered farmers helpless. Fortunately, it has roused the government's attention to providing adequate financial services to support farmers. Their income growth slowed down in the late 1990s and became a top-priority issue for the new Chinese government that was inaugurated last March.

"China's agricultural insurance should be a commercial one, assisted with government preferential polices," Xu Wenhu said.

The first special agricultural company in Shanghai will be a commercial operation with financial aid from the government. Shanghai since 1992 has integrated the profitable rural house-building insurance with the agricultural insurance to support the latter's development, according to Mo Yunhua, a senior official with the Shanghai agricultural commission.

The city entrusted the insurance package to be independently operated by the agricultural department of the Shanghai branch of PICC Property and Casualty Co. Ltd. The operation not only offset cumulative losses in the past years but built up an insurance fund reserve of 194 million yuan (US$23 million).

According to Prof. Xu Wenhu, the Chinese Insurance Regulatory Commission listed five modes of developing the agricultural insurance, and special agricultural companies were expected to be the final solution.

The government is considering launching more trial programs in other provinces or cities to test the usefulness and success of the agricultural insurance mode of commercial operation plus financial aid, according to sources with the Chinese Insurance Regulatory Commission.

Financial and insurance preferential treatment for farmers have been listed as one of the major polices stated in the "No. 1 Document" that stressed agriculture and farmers' income and was issued early this year by the State Council, China's central government.

It was the first time in 18 years that the Chinese government released its yearly number one document on agricultural issues. It announced a string of five "No. 1 Documents" on agriculture in the late 1970s and early 1980s when China first kicked off its reform and opening drive, when breakthroughs had been made in agriculture.

(Xinhua News Agency February 23, 2004)