How to attract businesses to participate in Agricultural Insurance?

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Development of incentive policies for insurance companies is one of the proposals to attract of businesses in the field of Agricultural insurance. Photo: Nguyen Thanh

Great risk

At the forum on “Agricultural Insurance: Identifying challenges and promoting growth” on 21st December 2017 in Ha Noi, Ms. Hoang Thi Tinh, Vice Chairmwoman of the Board, General Director of Agricultural Bank Insurance Joint Stock Corporation (ABIC) said that in 2011, the Government directed the pilot implementation of agricultural insurance under Decision 315/2011/QD-TTg and achieved some initial results. Especially, the program invited 304,017 farmer households to buy insurance for fishery productions, rice and livestock (buffaloes, cows, pigs and chickens) with revenue of VND 394 billion and compensated VND 712.9 billion for insurance buyers.

However, after the pilot, the program was difficult to expand nationwide, especially insurance for the fishery productions and livestock.

Because the annual loss in agriculture production is very high (estimated at 1.5- 2% of GDP), requires the Insurance Company to have a large amount of capital and high insurance premiums for the buyer to ensure a business loss. In addition, the national statistic data base on the scale and level of losses is insufficient and inexact. Thereby, there is no basis to assess risk premium.

Also, Ms. Tinh said that insurance companies and re-insurers do not have much experience in agricultural insurance in Vietnam, especially with risk assessment for insurance premium and loss assessment.

Regarding this issue, Mr. Hoang Xuan Dieu, Vice Chairman of the Motor Vehicle Accident Compensation Board, Bao Viet Insurance Corporation said that Agricultural Insurance is piloted in 20 provinces by Bao Viet Corporation and Bao Minh Corporation for 3 main products: livestock, rice and fishery products.

According to Mr. Dieu, many risks and differences between areas is the biggest difficulty when implementing the pilot agricultural insurance. In addition, the farmers still depend on the State’s support and must be compensated when buying insurance.

“Besides, the current insurance products do not meet the diverse requirements of farmers in some areas. In some areas, people do not pay attention to Agricultural Insurance. The pilot time is short and there are many changes in life, as well as the process of insurance exploitation, loss assessment and risk management are still weak, causing difficulties in implementing Agricultural Insurance,” Mr. Dieu said.

Policies need to be completed soon

In order to implement Agricultural Insurance more effectively in the future, Mr. Dieu proposed that it needs complete Agricultural Insurance policies to be a part of the overall policy on agricultural and rural development. The Ministry of Finance needs to support general management and instruct insurance premium collection from State budget. The Ministry of Agricultural and Rural Development needs to support agricultural techniques and complete risk management and loss assessment.

In addition, Mr. Dieu proposed that in the future; Insurance Companies can be more active in product design, area selection, assessment exploitation, learn and complete the process of exploitation, sale of products, risk management, loss assessment and compensation

Agreeing with Mr. Dieu’s opinion, Ms. Tinh also proposed that the Government ministries and sectors need to promulgate legal frameworks to remove difficulties to mobilize more resources to promote Agricultural Insurance.

In addition to supporting Agricultural Insurance buyers on insurance premium, it needs to develop incentives policies for Insurance Companies. Such as, reducing Corporate income tax, and a reserve fund for Insurance Companies for when their business results show a loss,” Ms. Tinh said.

Regarding this issue, Mr. Ngo Viet Trung, Deputy Director of the Insurance management and Supervision Department (Ministry of Finance), said that in October 2017, the Ministry of Finance submitted to the Government a draft Decree on Agricultural Insurance with 2 policies on the implementation and support of Agricultural Insurance.

Encouraging localities to jointly support the agricultural insurance premiums

In which, it stated that firstly, Agricultural Insurance is implemented on the principle of a voluntary agreement and is not limited by participants, insured risks and areas.

Secondly, the policies supporting Agricultural Insurance are implemented in accordance with the balance of State budget in each period. Also, the draft decree developed specific provisions on risk control, prevention, limited loss and insurance fraud to ensure the two policies are implemented transparently, stably and effectively.