How can "vegetable insurance" in underdeveloped areas go further?
"In late July, an acre of baby cabbage could sell for more than 1,000 yuan, and by August it had risen to 4,000 to 5,000 yuan per acre, but by September, an acre of baby cabbage had fallen to 600 yuan..." Last year, in Xiashanba Village, Dongzhai Town, Yongchang County, Gansu Province, the roller-coaster ride of vegetable prices still pains vegetable farmer Ma Yun when he recalls it: the 120 mu of baby cabbage he planted ultimately lost him 160,000 yuan.
How can vegetable farmers who "have a good harvest but struggle to profit from it" strengthen their ability to withstand market risks?
After the Spring Festival in 2015, Yongchang County officially launched a pilot program for vegetable price insurance; in July of the same year, this insurance began underwriting and issuing policies. Ma Yun was among the first group of beneficiaries: "Thanks to the vegetable price insurance I had taken out through the county beforehand, I received 92,000 yuan in compensation afterward, which reduced my losses to a minimum."
Due to factors such as the production characteristics of vegetables and the volatile market, implementing vegetable price insurance is no easy task. How did Yongchang County do it? A reporter recently went deep into the local area to investigate.
An advantageous industry goes on a roller-coaster ride, and farmers have a strong demand for insurance products
"In the summer of 2014, in Yongchang County, a large area of lettuce matured but no one was interested even at 5 fen per jin, and it ultimately rotted in the fields." Regarding this, Song Jinglin, who came from the Property Insurance Supervision Department of the Beijing Regulatory Bureau of the China Insurance Regulatory Commission to serve as deputy county magistrate in Yongchang County, told reporters that Yongchang is located in the main grain-producing area of the Hexi Corridor, and vegetable cultivation is a traditional advantageous industry there. The repeated situations of vegetables being "hard to buy and hard to sell" not only caused huge losses to vegetable farmers, but also became a prominent problem constraining local farmers from escaping poverty and becoming prosperous. Through in-depth research, he found that the coverage of agricultural insurance in Yongchang County was low, and vegetable farmers urgently needed suitable insurance products to help them prevent and defuse market risks and minimize losses.
In July 2015, Yongchang vegetable price insurance officially passed the relevant approvals and began underwriting and issuing policies.
Zhao Mingzu, director of the Financial Office of the Yongchang County Government, told reporters that Yongchang County made innovations in implementing vegetable price insurance, covering both the natural risks during the vegetable growing period and the price risks during the harvest and sales period. The former is compensated by the insurance company according to the degree of damage and the agreed compensation ratios for different planting periods; the latter requires, during the 15-day insurance period after harvest and listing, differential compensation based on the portion by which the local average ex-field vegetable price falls below the agreed insured price, with compensation paid during natural risk occurrences deducted at the time of payment. "The insured amount per mu of vegetables does not exceed 2,000 yuan, which can basically cover the materialized costs of vegetable cultivation and part of the reasonable expected returns. The premium per mu of vegetables does not exceed 200 yuan, with a rate no higher than 10%. Of this, the provincial finance department subsidizes 50%, the municipal level 20%, and the county level 10%. Farmers only need to bear 20% of the premium, no more than 40 yuan."
"Our vegetable price insurance mainly targets lettuce and baby cabbage, which are planted on a relatively large area in Yongchang, with insured amounts of 1,900 yuan and 2,000 yuan respectively." Zhang Dezhi, manager of the Yongchang County Branch of PICC Property and Casualty Company Limited, introduced that last year the company underwrote a total of 1,557 mu of lettuce and baby cabbage planted and harvested in Yongchang in autumn, achieving premium income of 306,800 yuan and providing local vegetable farmers with more than 3 million yuan in risk protection.
Chai Jun, a vegetable farmer in Liuba Township, was one of the first beneficiaries of the pilot vegetable price insurance program implemented in Yongchang County. In 2014, Chai Jun's vegetable-growing losses reached 400,000 yuan. "In the summer of 2015, as soon as I heard about vegetable price insurance, I insured 150 mu of baby cabbage at the first opportunity and paid 6,000 yuan in premiums." Chai Jun said that after the baby cabbage matured, prices were good early on, but later fell, causing him a loss of 200,000 yuan. Fortunately, vegetable price insurance paid 120,000 yuan in claims. "This is much better than 2014. It basically recovered the cultivation cost, and the pressure was greatly reduced."
"Crossing the river by feeling the stones": it is not easy to advance vegetable insurance in underdeveloped areas
Vegetable price insurance is not a new thing, but in Gansu Province, located in the underdeveloped western region, Yongchang was the first in the province to "eat the crab." Constrained by objective factors such as the level of economic development and fiscal funds, implementing vegetable price insurance faces many difficulties.
Difficulties such as incomplete historical data, insufficient staffing, and lack of underwriting and claims experience all directly increase the operational difficulty for insurance companies. In addition, the early-stage insurance product design process also needs to rely on support from a portion of reasonable assumptions and speculation, making the final operating results difficult to predict.
Compared with this, whether the insurance company has the ability to bear the losses from vegetable price insurance claims has become the key to whether this insurance can operate sustainably. Last September, Yongchang County suffered successive waterlogging disasters caused by heavy rain and frost disasters across the county, leading to reduced yields of some baby cabbage and total crop failure of large areas of lettuce. At the end of October, the company paid compensation for the losses from the two disasters to farmers. In October, affected by factors such as the concentrated listing of vegetables from surrounding markets, the price of Yongchang baby cabbage remained persistently low, and the average ex-field price was lower than the agreed insured price, so the company paid claims again. Taking last year's overall situation into account, the simple loss ratio reached 280%.
"This is quite a challenge for insurance companies!" Song Jinglin said that for innovative agricultural insurance products, insurance companies cannot focus on temporary gains and losses, but should look at the overall effect and long-term social effect, and need to make coordinated plans for 3 to 5 years or even longer.
Only by stabilizing operating returns and "escorting" vegetable farmers can sustainability be achieved
Zhang Dezhi believes that if vegetable price insurance is to operate sustainably, it is necessary to fully follow the "law of large numbers," further expand the underwriting area, increase the varieties of insured vegetables, and balance insurance premiums with loss compensation and other expenses to stabilize operations. To achieve this, the government needs to continue investing fiscal funds in premium subsidies and help insurance companies collect basic data. Insurance companies themselves need to accelerate the training of a professional agricultural insurance business team and further improve insurance products to make risks more controllable. At the same time, multi-party collaboration is also needed to promote the continuous improvement of people's insurance awareness.
Zhao Mingzu believes that for underdeveloped areas, how to reduce the burden of fiscal subsidies on specific agricultural insurance products in the future while keeping the premiums borne by ordinary people unchanged, and use the saved funds to expand the underwriting area or increase insured varieties, requires further discussion and improvement.
Agricultural insurance is part of the national policy benefiting farmers and cannot do without the support of government fiscal funds, but the price insurance work carried out nationwide currently still has no central fiscal subsidy, and basically relies on funding input from provincial, municipal, and county governments at all levels. Song Jinglin believes that Gansu is an economically underdeveloped province, and fiscal funds at all levels of government, especially county-level financial resources, are very tight. The single-core driven model long relied upon in agricultural insurance development, with increased fiscal subsidies as the driving force, is showing a trend of gradually diminishing marginal utility. A multi-core driven model supported by the continuous release of policy dividends, enhanced farmers' awareness of insurance, and increased enthusiasm for participation by operating entities has begun to show initial results. In order to promote the sustained and stable operation of vegetable price insurance, next Yongchang needs to further strive to create a favorable external environment, actively seek safeguard measures for optimization plans, build a long-term mechanism supporting financial innovation, and explore new ideas for the development of agricultural insurance in the western region.