Finance Ministry proposes trial farming insurance subsidy

The Finance Ministry has proposed a trial scheme to 2012 to help farmers buy insurance for their crops and livestock.

The ministry’s insurance department deputy director, Le Song Lai, said farmers who joined the proposed scheme would have their insurance fees subsidised by up to 60 per cent.

The subsidy for poor farmers would be up to 90 per cent.

Dairy farmers would have to pay a yearly fee of only VND32,000 ($1.6) instead of the existing VND320,000 and would receive up to VND7.2 million ($378) for each dead beast.

Up to 70 per cent of Viet Nam’s population are rural dwellers and earn their living from agriculture which produces 20 per cent of the country’s gross domestic product.

But farmers insure just one per cent of their crops and livestock despite their massive yearly losses to epidemics and natural disasters, reports the ministry.

It estimates the losses at VND13-15 trillion (US$684-789 million) while State support ranges from only VND200 billion to VND400 billion ($10.5-21.05 million).

An example of disease is the continuing outbreak of blue-ear virus.

More than 147,710 pigs in 16 cities and provinces were reported to have been infected by last Wednesday with 66,286 slaughtered and burnt.

The Agriculture and Rural Development Ministry’s Co-operatives and Rural Development Department deputy director Le Quy Dang explained: “Farmers only want to buy insurance for high-risk crops and livestock but the insurance companies prefer to insure low-risk ventures.”

Agricultural insurance was a high-risk business and failed to attract investors who wanted a high profit, he said.

Small-scale production; limited farmer expertise in cultivation and disease prevention also made insurance companies tardy about selling them insurance.

Failed

The Bao Viet Insurance Company and the Groupama Corporation – the first two companies to offer insurance for agriculture in 1992 – have since failed.

The acting director of the Viet Nam Agriculture Bank (Agribank) subsidiary ABIC Company, Do Minh Hoang, said the pioneer effort had failed because only a limited number of farmers bought the insurance while the companies evaluated the risk of each individually.

The result was that farmers at the highest risk could not afford the insurance.

The failure had subsequently discouraged others from offering insurance to farmers.

The Finance Ministry’s Insurance Department also argues that insurance enterprises lack comprehensive and accurate methods to evaluate risk and possible losses in agricultural production.

The insurance enterprises use three ways to calculate risk, it says.

An estimate based on the harvest value of each crop;

The index of yearly natural disasters; and

An index of quantity which allows payment for crops and livestock lost to natural disasters or disease.

But to compensate for more than 20 per cent of the losses is beyond their capacity. — VNS

Proposal ‘welcome’

HCM City dairy farmer Nguyen Van Tui, whose herd numbers more than 100 cows, said he and other farmers would almost certainly insure their livestock if the insurance fees were subsidised.

“We all know about the importance of insurance,” he said.

After suffering heavy losses from melamine pollution and the low price of milk, we really don’t want to carry more risks.”

Viet Nam Insurance Association general secretary Phung Dac Loc said international companies that have the financial capacity to reinsure with other countries when losses totalled more than 50 per cent of assets should be encouraged to enter the market.

Then, domestic investors would provide money for the industry.

For example, the Agribank had chosen a Swiss reinsurance corporation with reported investment capital 30 times that of the bank as its partner in the launch of new agricultural insurance products.

Experts said a strategic plan with legal framework should be issued soon to win foreign investors. This would act as a base for building a model to develop the services across the country.

Tags: farming insurance subsidy, Vietnam insurance, Vietnam insurance industry, Vietnam insurance market