Agricultural insurance: who pays when demand is high but willingness is low? Insurers' pilot programs stuck in a dilemma
Several months ago, the draft of the Agricultural Insurance Act was returned by the Executive Yuan on grounds such as "insufficient concluded items, insufficient insured scale, and insufficient basis to estimate agricultural insurance expenditure." At the time the bill was sent back, Hsu Wei-wen, Director-General of the Agriculture and Food Agency's Agricultural Finance Bureau under the Council of Agriculture, the agency chiefly responsible for agricultural insurance, promised that by the end of the year it would again report the results of the pilot program to the Executive Yuan and discuss matters concerning the enactment of special legislation.
Now the end of the year is approaching, yet old problems such as low farmers' willingness to insure and low insurers' willingness to underwrite remain unresolved. Under these circumstances, how should agricultural crop insurance compete and coordinate with the existing natural disaster relief funds? And how should it precisely target the intended demographic for agricultural crop insurance? The Taiwan Rural Economics Society especially invited representatives from agricultural policy agencies, insurance association representatives, and local agricultural representatives to jointly discuss a plan for agricultural crop insurance to be "sustainable and lasting."
News in numbers: Over the past decade, natural disasters have struck Taiwan frequently. According to calculations by the Agricultural Finance Bureau, an average of 2.5 billion yuan in cash relief funds must be allocated each year, but average annual agricultural disaster losses reach as high as 10.7 billion yuan, with subsidy amounts far below the amount of agricultural losses; the Council of Agriculture believes that to stabilize farmers' incomes, "agricultural insurance" is imperative.
Agricultural insurance is a "high demand, low willingness" product: Will rice sprouting be compensated?
Since the pilot agricultural crop insurance program began, agricultural policies for rice, mango, pear (Pyrus), grouper, and facilities have been introduced, but "farmers' low willingness to insure" has consistently become a bottleneck for promotion. What exactly is the fundamental reason farmers are not buying in?
Yang Ming-hsien of the Taiwan Rural Economics Society first pointed out that agricultural insurance for farmers is a "high demand, low willingness" product; Huang Li-chin, Standing Supervisor of the Houbi Wumile Promotion Association, was even more blunt: "Although buying insurance is a safeguard for farmers' livelihoods, I don't want to buy a policy from which I can't collect any money."
What is a policy from which you can't collect money? Huang Li-chin explained that with the rice regional harvest crop insurance policy, "yield" is the main claims benchmark, "but the first crop season does not encounter typhoons; instead it faces the plum rain and rice sprouting problems." At that time, what is affected is not rice yield but rice quality, "but if the rice sprouts, does the rice policy pay or not?" The current policy design will steer farmers toward "buying only second-crop rice insurance, not first-crop rice insurance."
Hearing this, the attending Fubon Insurance assistant manager said they welcomed natural disaster relief funds being adjusted in the future according to the insurance participation rate, since this concerns whether the relationship between natural disaster relief and agricultural crop insurance is one of competition and coordination or one of mutual exclusion.
"The United States also promoted (agricultural insurance) for a long time before completely cutting off cash relief; it was not cut off abruptly." The assistant manager stated that agricultural insurance indeed needs time to be reorganized, and believes that as future policies are gradually adjusted, insurance companies will have the opportunity to do better.