How far is modern agricultural insurance from farmers?
"In the past, my awareness of buying insurance was not strong; I mainly relied on the government's mobilization to take out insurance. Later, after a typhoon caused me serious losses, I felt I had to buy insurance. In recent years I have been actively taking out insurance, and last year I insured all 230 hectares of transferred farmland." The account by Guo Qinglian, chairman of the Dayangzi Agricultural Cooperative in Dehui City, Jilin Province, represents the sentiments of many farming households.
Agriculture is a weak industry. Especially at present, as moderate-scale agricultural operations in China develop rapidly, natural risks, market risks and quality and safety risks in agriculture keep accumulating, creating an urgent need for agricultural insurance to protect the way. However, because of a low starting point and a thin foundation, China's agricultural insurance still cannot well meet the needs of modern agricultural development, and problems remain, such as relatively low insurance penetration, a single variety of insurance products, and an insufficiently sound subsidy system.
Under the new situation and new requirements of agricultural modernization, how should agricultural insurance be adjusted and transformed?
Policy promotion and technological innovation: agricultural insurance keeps "raising standards and expanding coverage"
"Rural areas now have grain-growing insurance, so farmers who suffer disasters can get the compensation they deserve. Last April, our township suffered a large-scale hail disaster, and most people received the insurance payouts they deserved, so their incomes did not fall." Fan Yongdong of Dongzhai Village, Lougou Township, Pianguan County, Xinzhou City, Shanxi Province, said by way of introduction. What Fan Yongdong has seen reflects, from one side, the outstanding achievements China has made in building its agricultural insurance system.
It is understood that in 2015, the main crops insured in China exceeded 1.45 billion mu, accounting for 59% of the national sown area, and the average insurance coverage rate for the three major staple grain crops exceeded 70%. Agricultural insurance has played an important "stabilizer" role in stabilizing agricultural production and increasing farmers' incomes. What is especially encouraging is that in practice, agricultural insurance is no longer merely a form of risk compensation, but increasingly highlights functions such as proactive disaster prevention and mitigation, and even production adjustment, credit enhancement through guarantees and social management. It can be said that the functions of agricultural insurance are being further expanded, and it has become an increasingly important part of China's agricultural support and protection system.
In order to strengthen agricultural insurance's support for agriculture and benefit to farmers, the insurance regulatory authorities have also actively innovated their regulatory model. Chen Wenhui, vice chairman of the China Insurance Regulatory Commission, pointed out that the state is paying increasing attention to agricultural insurance, and agricultural insurance faces its best period of development opportunities. Next, with "expanding coverage, raising standards and increasing products" as the core, it is necessary to consolidate the fundamentals, cover all fields and steadily raise standards, joining forces to create an upgraded version of agricultural insurance for the new era.
"The innovative project review mechanism established by the CIRC last year greatly stimulated the company's drive to innovate, ensured the company's compliant operations, and proved that the mechanism is truly effective." Shi Jian, president of Anxin Agricultural Insurance Co., Ltd., said.
The remarkable achievements in agricultural insurance have relied both on policy promotion and on technological innovation. Luo Haiping, chairman of China United Property Insurance Company Limited, said: "By establishing a system for applying new technologies in crop insurance, we focus on solving the difficulties of surveying, assessing losses and slow response times in large-scale agricultural disasters, and conduct surveys and claims settlement in the most convenient way. This has played an important role in surveying and assessing losses in major natural disasters."
The level of protection is still insufficient, and insurance products still need improvement
"Farmers have low insurance awareness and high expectations for compensation, and there are also some deviations in their thinking. Add to that reasons such as claims standards and operational difficulty, and it is still very difficult to carry out crop insurance at the grassroots level." A manager of an insurance company in Baise City, Guangxi, reported to the reporter.
Not only that, Wang Jinbao, director of the Shandong Provincial Department of Agriculture, pointed out: "At present, the insurance signing rate is very uneven among different types of insurance and different regions. In addition, grassroots fiscal matching funds are difficult, and the participation rate is relatively low, so the government therefore lacks the initiative to actively expand agricultural insurance business."
"The terms of agricultural insurance now are incomprehensible, and basically it is the insurance company that decides how much is paid out. Moreover, agricultural insurance now only covers corn, rice and soybeans. I suggest further expanding it to vegetables, fruit crops, greenhouses and so on." Guo Qinglian expressed the above wishes.
"Big grain growers like me have high input costs, and once a relatively large disaster occurs, the losses are enormous. As a major grain-growing household, my direct input in rice production is now about 850 yuan per mu per season, while under the existing insurance policy, only 360 yuan per mu is paid after crop failure. The level of protection is still too low." Ding Qiaoyun, a major grain-growing household in Taoyuan County, Changde City, Hunan Province, said, suggesting that insurance for large households adopt a method of "pay less, receive less; pay more, receive more." Many major grain-growing households can accept paying higher premiums to obtain higher protection.
In response, Tuo Guozhu, a professor in the Department of Finance at Capital University of Economics and Business, believes that in addition to improving insurance products, agricultural insurance should implement a differentiated fiscal subsidy policy and gradually cancel matching funds at the city and county levels in economically underdeveloped counties, especially in major grain-producing areas; and by raising the level of insurance protection, adapt to the high-input and high-cost requirements of new types of business entities.
Guo Shengchen, president of PICC Property and Casualty Company Limited, also believes that it is necessary to promote the improvement of the top-level design of China's agricultural insurance and explore the establishment of a multi-tiered agricultural insurance protection system. On the basis of basic insurance, agricultural production and operation entities may voluntarily purchase highly protected agricultural insurance products; for insurance on local specialty agricultural products, the central government's "reward and subsidy" policy should be implemented as soon as possible.
Draw on international experience and improve the risk diversification mechanism
"The natural characteristics of agricultural production, which make it prone to disaster and damage, lead to the high risk and high volatility of agricultural insurance operations; moreover, long-term, stable and sustainable operation is a requirement of agricultural insurance policy. Therefore, how to effectively diversify risk and avoid operational volatility is a key issue that every country needs to address in developing agricultural insurance." A relevant official of the CIRC pointed out.
From the international perspective, developed countries have generally established mechanisms for diversifying major agricultural disaster risks. It is understood that the United States, Japan, Spain and other countries have all set up specialized institutions according to law to support agricultural insurance reinsurance. The United States, which has the world's largest agricultural insurance market, has greatly strengthened insurance companies' enthusiasm for operating agricultural insurance and their ability to withstand risk since 1996, when government legislation stipulated that the Federal Crop Insurance Corporation (FCIC) provide stable reinsurance support, rapidly raising the protection level and coverage of U.S. agricultural insurance.
Drawing on international experience, in November 2014 the China Agricultural Insurance Reinsurance Pool (hereinafter referred to as the "Agricultural Reinsurance Pool") was formally established. "Since the central government began implementing premium subsidies for agricultural insurance, agricultural reinsurance has provided cumulative risk protection of more than 600 billion yuan and paid claims of more than 15 billion yuan." Jiang Caishi, chairman of the general meeting of members of the Agricultural Reinsurance Pool, told the reporter that at present, while providing the industry with adequate reinsurance protection, the Agricultural Reinsurance Pool also provides professional technical support in serving new types of agricultural operation entities, innovating insurance products and supporting local specialty agricultural insurance, and is playing an ever-greater role in promoting insurance services for agricultural modernization. Li Lisong, general manager of the management agency of the Agricultural Reinsurance Pool, believes that the establishment and operation of the Agricultural Reinsurance Pool is precisely a mechanism innovation combining international experience with China's practice. "In the future, it is necessary to ensure the independence and impartiality of the operation of the Agricultural Reinsurance Pool and expand reinsurance underwriting capacity and protection scope, so as to give play to the cornerstone role of the Agricultural Reinsurance Pool in stabilizing the agricultural insurance system." Chen Wenhui, vice chairman of the CIRC, stressed.