Agricultural insurance gradually takes root in farming households: subsidies increased and a risk compensation mechanism introduced

Increase fiscal subsidy intensity, introduce a risk compensation mechanism

Agricultural insurance gradually wins farmers' “hearts”

By He Wei, our reporter

Recently, Super Typhoon “Rammasun” caused major losses to agriculture in Hainan. According to statistics from the Hainan provincial government, the affected crop area reached 2.445 million mu, of which the total crop failure area was 582,000 mu, and preliminary statistics put livestock and poultry deaths at 25 million. Rubber, areca nut, banana, rice, melons and vegetables, and other crops suffered severe damage, with total crop failure occurring in many plots. In Haikou, Chengmai, and other places, large areas of banana plants were snapped, with the affected area reaching 100,000 mu.

Facing the major impact brought by “Rammasun”, Hainan's agricultural insurance played a strong protective role. Statistics show that as of 12:00 on July 23, Hainan Province had received 580 agricultural insurance claims in total, mainly concentrated in 12 cities and counties including Wenchang, Haikou, and Chengmai, involving 7 types of agricultural insurance such as banana, greenhouse melons and vegetables, and rubber, with estimated losses reaching 140 million yuan. So far, 2.21 million yuan has been paid to households.

“Years of getting rich, one disaster back to poverty” is a major bottleneck constraining the development of the agricultural economy in Hainan and even across the country. In response, Hainan Province launched a pilot policy-based agricultural insurance program in 2007, beginning to hold up a “protective umbrella” for the vast number of farming households in Hainan.

According to statistics, from 2007 to the end of 2013, Hainan Province's agricultural insurance premium income totaled 792 million yuan, with an average annual growth rate of 76.8%; cumulative claims paid reached 543 million yuan, with a payout ratio of 68.56%. Among these, in 2011, Typhoon “Nasha” caused heavy losses to rubber and bananas, and that year's cumulative claims paid reached 113 million yuan, with a payout ratio of 116.4%.

Still getting rained on under the “protective umbrella”

Although agricultural insurance coverage has grown rapidly, many farming households still cannot enjoy the benefits brought by agricultural insurance.

Lin Xinbo, a sow farmer in Huangqiong Village, Jinjiang Town, Chengmai County, currently runs a small pig farm. “Because the breeding technology is not advanced enough, pigs die of disease every year. Now that I've heard there is sow insurance, we hope to share the risk by buying insurance. But I went to the insurance company's business office several times, and the staff all said this business has not yet been launched.” Lin Xinbo said.

Later, after asking around extensively, he learned that the insurance company was unwilling to underwrite insurance for small pig farmers. This is because policies for small pig farmers yield thin profits, claims are scattered, and labor costs are high.

Similar to Lin Xinbo's situation, Pan Jinfeng, a rubber grower in Shiwu Village, Danzhou City, has over a thousand rubber trees at home. Because the planting area is scattered, the insurance company is unwilling to underwrite insurance for her.

“Losing money” became the main reason insurance companies were unwilling to underwrite insurance for these farming households.

In 1985, PICC P&C Hainan Provincial Branch once operated exclusively under a commercial insurance model and launched businesses such as rubber, banana, watermelon, and forest fire insurance. However, from 1985 to 2006, its cumulative agricultural insurance premium income was 58.6193 million yuan, and cumulative claims expenditure was 52.254 million yuan. After deducting necessary operating expenses, Hainan's agricultural insurance was in a loss-making state for a long time.

After calculating and evaluating 14 types of insurance, the insurance company found that several insurance varieties, such as Nanfan seed-production rice and bananas, carried extremely high risk. Taking Nanfan seed-production rice as an example, PICC insured 31,800 mu of seed-production rice this year and received 3 million yuan in premiums. However, due to the impact of early-spring cold waves and strong winds, the insured Nanfan seed-production rice currently shows large-scale losses, with preliminary loss assessment at 30 million yuan, and losses may reach 10 million yuan.

Government funding to plug the gaps

Because purely commercial agricultural insurance was difficult to develop in Hainan, Hainan began to subsidize agricultural insurance by investing fiscal funds, and agricultural insurance embarked on the path of policy-based insurance.

According to Jin Yichang, deputy director of the Debt and Finance Division of the Haikou Municipal Finance Bureau, premiums for policy-based agricultural insurance consist of two parts: fiscal subsidies and farmers' own contributions. Data show that in recent years, Hainan Province has invested a cumulative total of 495 million yuan in fiscal funds for premium subsidies, providing risk protection exceeding 44.3 billion yuan, covering 2.46 million farmer households-times, and amplifying the effect of fiscal funds supporting agriculture by about 130 times.

Government subsidies greatly increased farmers' enthusiasm for participating in insurance. “In the first 5 months of this year, the insured volume of Nanfan seed-production rice, greenhouse melons and vegetables, bananas, and other insurance varieties rose sharply. Among them, the task for greenhouse melons and vegetables was 312 mu, with a completion rate of 1331%; the banana insurance task was 8,000 mu, with a completion rate of 164%; the Nanfan seed-production rice task was 4,000 mu, with a completion rate of 294%.” Wu Kunsheng of the Debt and Finance Section of the Dongfang Municipal Finance Bureau told our reporter.

According to the provisions of the 2014 Hainan Agricultural Insurance Work Implementation Plan, starting this year, the Hainan provincial government assigns tasks for some agricultural insurance varieties to each city and county. When a city or county's underwriting scale for a certain insurance variety exceeds 150% of the plan issued in this plan, the city- and county-level fiscal subsidies for the portion exceeding the plan shall be fully borne by the provincial-level finance.

This measure effectively resolved the insurance companies' concerns. According to a relevant person in charge of agricultural insurance at the PICC Ledong County Branch, at present, PICC P&C in Ledong has accepted insurance applications from farmers for 7,000 mu of greenhouse off-season vegetables and 11,000 mu of bananas. Premiums are subsidized by finance, so there is no longer any worry about not being able to collect premiums in full.

“Using insurance to support insurance” wins farmers' “hearts”

In the 2014 Hainan Province Agricultural Insurance Implementation Plan, our reporter found that, in order to support commercial insurance companies in carrying out policy-based agricultural insurance work, Hainan Province will select 1 to 2 cities or counties to trial “using insurance to support insurance” and provide risk compensation to commercial insurance companies. That is, insurance companies doing agricultural insurance are eligible to participate in bidding for auto insurance policies for official vehicles of provincial directly administered administrative institutions, so that possible losses from agricultural insurance can be subsidized through other insurance varieties. It is understood that PICC P&C Hainan Provincial Branch, due to its outstanding work in carrying out policy-based agricultural insurance, has obtained the 2014 auto insurance policy for official vehicles of Hainan provincial directly administered administrative institutions.

“At present, Hainan Province is improving the ‘using insurance to support insurance’ mechanism and continuing to explore ‘bundling’ government-financed low-risk insurance and agricultural insurance for bidding, in order to increase the enthusiasm of insurance operating institutions. At the same time, the Hainan Provincial Agricultural Insurance Office will from time to time inspect PICC P&C's contract performance and require submission of an annual summary and financial statements after the year ends. If insurance services are found to be substandard, the Department of Finance will take measures to urge service improvement.” said a relevant person in charge of the Hainan Provincial Department of Finance.

Next, Hainan Province will introduce more insurance companies in the advancement of policy-based agricultural insurance to form a market-oriented competitive landscape. At the same time, it will continue to study linking other non-agricultural insurance funded by government finance with agricultural insurance, appropriately adjust the scope of “using insurance to support insurance”, and further realize market-oriented operation of agricultural insurance subsidy methods.