How can the agricultural insurance dilemma be solved? Mutual insurance offers a new approach
Along with the opening of the CIRC's approval gate for mutual insurance licenses at the beginning of this year, the term “mutual insurance” has become extremely hot in the insurance industry and the investment field. When many people still did not understand the concept of “mutual insurance,” more than 20 institutions had already seized the initiative and formally submitted applications to the CIRC, queuing up to apply for mutual insurance licenses. On the stage of China's insurance market, a drama starring mutual insurance has already quietly begun.
What is mutual insurance
Mutual insurance refers to insurance activities in which units or individuals with homogeneous risk protection needs become members by entering into contracts, pay premiums to form a mutual aid fund, and when losses are suffered due to occurrences stipulated in the contract, the fund bears the liability for insurance compensation.
In fact, mutual insurance is one of the most important forms in today's global insurance market, existing alongside social insurance and commercial insurance. In our country, because commercial insurance was introduced first, the concept of mutual insurance was promoted relatively late, and mutual insurance's share of insurance business is far below the international level.
According to statistics from the International Cooperative and Mutual Insurance Federation, in 2013 global mutual insurance premium income reached 1.23 trillion US dollars, accounting for 26.7% of the global insurance market, covering 825 million people, with total assets of mutual insurance organizations exceeding 7.8 trillion US dollars. The share of mutual insurance in the US market reached 36%, Japan's mutual insurance market share exceeded 40%, and France's mutual insurance market share was as high as 46%; while the market share of mutual insurance in our country is only 0.3%.
If a mutual insurance company is compared with a stock joint-stock insurance company, the obvious differences between the two can be seen: customers of a stock joint-stock insurance company do not participate in corporate governance, and operating profits are distributed to shareholders; while a mutual insurance company has no shareholders, members are customers, and each person has one vote to jointly participate in corporate governance, with all operating surplus returned to members.
It is precisely because of the important differences between mutual insurance companies and stock joint-stock insurance companies that the unique advantages of mutual insurance are highlighted: the interests of policyholders and insurers are highly aligned; business development costs are relatively low, which can effectively reduce operating costs; and because there is no profit pressure, it helps develop insurance types conducive to the long-term interests of the insured.
Exploration by pioneers
In our country, the main battlefield of the insurance industry is basically in cities. But this does not mean that agriculture and farmers do not need insurance. On the contrary, it is precisely industries and groups that need insurance more; agricultural insurance can be said to be an effective means of resisting disasters.
For a long time, because the agricultural sector has problems such as “high costs, high risks, high losses, difficult business development, difficult loss assessment, and difficult claims settlement,” commercial insurance is often difficult to operate; if premiums are high, farmers cannot bear them, and if premiums are low, insurance companies find it unprofitable, so the dilemma has always been hard to solve.
Along with the development of the world economy, mutual insurance has grown rapidly due to its characteristics of adapting to specific risk areas (such as agriculture and fisheries) and low- and middle-income groups, which provides a new opportunity to effectively solve the agricultural insurance dilemma.
In 2005, as a pilot for the mutual insurance system, our country established the first mutual insurance company——Sunshine Agricultural Mutual Insurance Company, beginning exploration of the mutual and membership model. In the ten years since Sunshine Agricultural Insurance was established, it has provided more than 130 billion yuan in risk protection for the Heilongjiang province region, with more than 8.2 million insured household-times; underwritten a total grain crop area of 530 million mu for farmers in the Heilongjiang and Guangdong province regions; and cumulatively paid more than 8 billion yuan in agricultural insurance claims, enabling more than 3 million disaster-affected farming households to receive timely compensation.
From the perspective of premium income, Sunshine Agricultural Insurance's premium income at its establishment in 2005 was 228 million yuan, and the latest annual report data for 2014 show that premium income had reached more than 2.7 billion yuan. From the perspective of operating insurance types, Sunshine Agricultural Insurance mainly involves crop insurance, livestock insurance, property loss insurance, liability insurance, statutory liability insurance, reinsurance, etc. It has now developed 213 unique insurance products and developed more than 1 million members.
On the stage of mutual insurance, although there is currently only one Sunshine Agricultural Insurance formally approved by the CIRC, some local rural mutual insurance organizations have also made very useful attempts. For example, the China Fisheries Mutual Insurance Association, established in 1994, and the Fulong Rural Insurance Mutual Aid Society of Longshan Town, Cixi City and the Cixi City Longshan Rural Mutual Aid Insurance Union, established in 2011, whose practices and experience provided fresh models for the CIRC's formulation of the Trial Measures for the Supervision of Mutual Insurance Organizations.