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Government Urged to Subsidize Crop Losses
Insurance insiders and agricultural experts are urging the government to provide financial aid to insurance companies or else directly to farmers in a bid to provide compensation for lost crops nationwide as droughts, floods and other natural disasters are hitting parts of China once again.
Crop insurance in China is lagging far behind this type of service in developed countries, and is behind other types of insurance service domestically as well, according to insiders and experts.
"We need more governmental support to cut down on our losses in this sector and to expand our service,'' said Wang Yamin, the official in charge of the agricultural insurance department under the People's Insurance Company of China (PICC), a leading state-owned property insurer.
Wang explained that agricultural insurance should be policy-oriented, that is, the government assures insurers that it will provide subsidies to cover their losses, or will pay a part of farmers premiums to encourage them to take out crop and livestock insurance, and that if it were offered, farmers would seek such coverage for most of their crops and livestock.
"There are many forms of such insurance, but there is not actually much of it done," Wang said.
He added that only about 20 out of total 80,000 PICC staff are involved in agricultural insurance nationwide so far.
Apart from PICC, the only other insurer in China offering agricultural coverage is the Xinjiang Uygur Autonomous Region-based Xinjiang Production Construction Property Insurance Company, Wang said its premium income is expected to be unsatisfactory.
In 2000, PICC agricultural insurance premiums totalled 300 million yuan (US$36 million) for livestock and crop coverage of about 6 billion yuan(US$722 million). The average claims by farmers for the year were a little bit higher than the premiums paid.
"The sum is just a drop in the bucket of our agricultural losses brought about by various natural disasters," Wang said.
Statistics from the Ministry of Agriculture indicate that over the past 10 years, on average 45 million hectares of crops have suffered from various disasters every year. By the end of May this year, 114 million livestock and 22.7 million hectares of crops had been damaged by drought.
Then why are farmers unwilling to insure their crops against natural disasters?
Liu Jing, an official with the Beijing branch of the China Insurance Regulatory Commission, said that most farmers don't want to pay the premiums without some outside help.
"China's agriculture is too disaster prone and most of the farmers are poor at present; therefore, we must establish an insurance system with financial aid from government," said Liu.
The practice in some foreign countries is to have the State pay 50-70 per cent of the premiums for the farmers.
Liu also suggested that the state should extend more favourable taxation policies to insurance companies and reinsurance mechanisms that require the State to shoulder some of the risk should be introduced to reduce the risk to insurers who offer agricultural insurance.
Zhang Linxiu, an agricultural expert with the Centre for Chinese Agricultural Policy, shares Liu's view.
"The government certainly needs to play an essential role in the service and, at the same time, industry organizations, such as the Milk Association and the Vegetable Association should also help farmers get crop insurance by providing them with funding or lobbying the government for such funding," said Zhang.
But so far, Zhang's centre has not finished its research on this question.
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