Absolute deductibles shall not be set in large livestock insurance clauses
On February 28, the Ministry of Finance, the Ministry of Agriculture and the CIRC, three ministries and commissions, jointly issued the "Notice on Further Improving the Drafting of Clauses for Central Government Premium-Subsidized Agricultural Insurance Products" (hereinafter referred to as the "Notice"). The "Notice" requires that when insurance companies set agricultural insurance clauses, the insured amount shall cover direct materialized costs or breeding costs, and that absolute deductibles shall not be set in the clauses of crop insurance and large livestock insurance underwritten on a per-head (per-animal) basis, such as for sows, live pigs and dairy cows.
Data from the China Insurance Regulatory Commission show that in 2014, agricultural insurance premium income was 32.57 billion yuan, up 6.2% year on year, and the insured amount was 1.66 trillion yuan, up 19.6% year on year. Claims of 21.46 billion yuan were paid to 35 million disaster-affected farming households, up 2.86% year on year. The area of major crops underwritten exceeded 1.5 billion mu, accounting for 61.6% of the national sown area of major crops. The forest area underwritten was 2.47 billion mu, with a coverage rate exceeding 85%. Claims of 930 million yuan were paid to 1.187 million disaster-affected farming households in the severe drought in Liaoning, and claims of 1.15 billion yuan were paid to the people affected by Typhoon “Rammasun”.
The "Notice" stipulates that the insurance liability of the main policy of crop insurance includes but is not limited to natural disasters such as rainstorms, floods (except government flood diversion and storage), waterlogging, wind disasters, hail disasters, freezing disasters, drought disasters and earthquakes, accidents such as mudslides and landslides, as well as pests, diseases, weeds and rodent damage; the insurance liability of the main policy of livestock insurance includes but is not limited to major diseases and epidemics, natural disasters (rainstorms, floods (except government flood diversion and storage), wind disasters, lightning strikes, earthquakes, hail, freezing disasters), accidents (mudslides, landslides, fires, explosions, building collapses, falling objects in the air), government culling, etc.
Regarding insurance compensation after government culling in the livestock industry, the "Notice" clearly states that when the government implements compulsory culling due to a highly infectious epidemic, the insurance company shall compensate the insured farming households, and may correspondingly deduct the special government culling subsidy amount from the compensation amount.
In terms of the insured amount, the "Notice" requires that the insured amount shall cover direct materialized costs or breeding costs. In terms of compensation, the "Notice" requires that absolute deductibles shall not be set in the clauses of crop insurance and large livestock insurance underwritten on a per-head (per-animal) basis, such as for sows, live pigs and dairy cows. Crop insurance clauses shall, based on the distribution proportion of materialized costs during the crop growth period, scientifically and reasonably set compensation standards for different growth stages. In principle, when total loss occurs, the compensation standard at the seedling stage for the three major staple grain crops shall not be lower than 40% of the insured amount. Finally, the "Notice" emphasizes that livestock insurance clauses shall take the harmless treatment of dead and diseased livestock and poultry as a precondition for insurance claims, and if harmless treatment cannot be confirmed, the insurance company shall not compensate.
A reporter from National Business Daily learned that, according to the requirements of the "Notice", the relevant insurance companies will conduct a comprehensive review of the clauses already filed, and complete the revision and re-filing before April 30, 2015. For any products that do not comply with the above provisions, the insurance regulatory authorities shall not file them; if the circumstances are serious, they shall be punished according to law, and the relevant circumstances shall be reported to the Ministry of Finance and the Ministry of Agriculture.