CIRC will improve the floating mechanism for agricultural insurance premium rates

On November 13, the CIRC held a press conference and stated that at the beginning of the year, in accordance with the Notice on Further Improving the Drafting of Product Terms for Central Government Fiscal Premium-Subsidized Agricultural Insurance, it deployed nationwide the upgrading and transformation of central government fiscal premium-subsidized agricultural insurance products, which has now been completed.

Agricultural insurance products have achieved comprehensive upgrading, with expanded insurance liability and improved protection levels, while premium rates and claims standards have been reduced to a certain extent, involving a total of 34 provincial-level regions, 15 types of crops and 6 types of livestock breeds, altogether 738 agricultural insurance products, and 22 insurance companies.

“Next, the CIRC will strengthen communication and collaboration with local governments, improve the product management system, formulate model terms for major crop insurance, and improve the agricultural insurance risk zoning and premium rate floating mechanism.” He Hao, deputy director of the Property Insurance Supervision Department of the China Insurance Regulatory Commission, said that day.

In the first three quarters of this year, China's agricultural insurance original premium income was 32.2 billion yuan, accounting for 5.14% of property insurance business, an increase of 0.17 percentage points over the same period last year. Agricultural insurance has now become the third-largest type of insurance in property insurance, after auto insurance and enterprise property insurance.

CIRC data show that in 2014, insured farming households reached 247 million household-times, major crops underwritten exceeded 1.1 billion mu, underwriting coverage approached 50%, and underwriting coverage for major staple grain crops exceeded 65%.

Abolition of “absolute deductible”

Since the central government fiscal subsidy policy was implemented in 2007, China's agricultural insurance has developed rapidly. However, with the rapid emergence of new types of agricultural operating entities, the original agricultural insurance terms can no longer meet the needs of agricultural risk management under the new situation, affecting the further expansion of agricultural insurance coverage and the further exertion of its functions. Narrow insurance liability, low protection levels, and strict claims conditions have become the issues most strongly reflected by the vast number of farming households and all parties.

This upgrading of agricultural insurance products marks the further improvement of the agricultural insurance product system.

According to He Hao, the upgrading of agricultural insurance products significantly expanded insurance liability. On the basis of the original natural disasters, crop insurance added major disasters such as drought and earthquakes, as well as geological disasters such as mudslides and landslides, and damage from pests, diseases, weeds and rodents; livestock insurance liability was expanded to all diseases and epidemics. Some regions also expanded liability for “snow disasters” and “wild animal attacks” in light of local conditions.

The protection level for major grain crops has also been raised. In most provinces and municipalities across the country, the insured amount has covered direct materialized costs, and the average protection level has increased by 10%-15%. For a small number of regions that, due to various factors, have not been able to cover direct materialized costs, the CIRC required insurance companies to develop commercial supplementary protection products to ensure that basic protection meets national requirements.

The upgraded agricultural insurance products abolished the absolute deductible clause and at the same time raised compensation standards for crops at different growth stages and under total crop failure. Focusing on major agricultural provinces, the CIRC guided all localities to lower insurance premium rates according to risk characteristics, risk distribution and operating conditions in recent years, and in some regions the crop insurance premium rate was reduced by nearly 50%.

In addition, in accordance with the requirements of the State Council, the CIRC summarized the successful experience of some regions in using agricultural insurance to promote harmless treatment and ensure social food safety, and made the harmless treatment of dead livestock and poultry in accordance with government regulations a precondition for obtaining insurance compensation, using economic means to guide farming households to voluntarily carry out harmless treatment of dead livestock and poultry and prevent dead livestock and poultry from entering the market.

10 companies apply to join the “Agricultural Reinsurance Pool”

In answering a question from a reporter from 21st Century Business Herald, He Hao said that the first-anniversary summary meeting of the China Agricultural Insurance Reinsurance Pool (“Agricultural Reinsurance Pool”) had just been held last week, and at the meeting another 10 insurance institutions proposed joining the Agricultural Reinsurance Pool, which is currently under review in accordance with procedures.

One year ago, an organization jointly initiated and established by 23 insurance companies with agricultural insurance operating qualifications, including PICC, and China Re, aimed to draw on international experience, fully integrate domestic insurance industry resources, enhance the overall risk management level of agricultural insurance, and provide sustained and stable reinsurance protection for agricultural insurance.

At present, the qualifications for agricultural insurance operations are relatively open, requiring no approval; only in terms of product approval and when products are set, including fiscal subsidies at all levels, how much farming households must pay, and protection liability, does the CIRC regulate according to the product situation. From the current situation, the main entities have a relatively strong willingness to operate agricultural insurance.

“For newly established companies, institutional deployment and staffing scale still need development; considering this situation, we absorbed them into the Agricultural Reinsurance Pool, not doing direct insurance, but doing reinsurance. This eased the companies' desire to do agricultural insurance and also gave them time and opportunities for development. Over this year, the Agricultural Reinsurance Pool has operated normally overall, and operating indicators have all been within the predetermined range.” He Hao told a reporter from 21st Century Business Herald.

The CIRC required that member companies of the Agricultural Reinsurance Pool continuously improve the operating mechanism, strengthen the accumulation and research of risk data, enhance the level of operation and management, strengthen the ability of agricultural insurance to respond to major disaster risks, overcome the impact of short-term and volatile external markets on the sustained and stable development of China's agricultural insurance, and ensure the stability of agricultural insurance risk diversification channels after major disasters.