Millions of Chinese farmers may no longer risk their fortunes on
the weather or be devastated by calamities like bird flu, as the
government gives hard thought to expanding agricultural insurance
coverage to include natural disasters.
Wu Dingfu, chairman of the Chinese Insurance Regulatory
Commission, says the government is exploring ways of expanding the
insurance to protect the nation's 900 million farmers from natural
disasters.
He reports that China is concentrating on commercially operated
agricultural insurance with financial and policy support from the
government. Pilot programs will get under way soon in two or three
provinces or cities, according to Wu.
China's first special agricultural insurance company is to be
set up and operational within the year in Shanghai. The company,
capitalized at 200 million yuan (US$24 million), is a landmark
trial by the Chinese government to promote farming insurance.
Xu Wenhu, director of the insurance department of Fudan
University in Shanghai, says the government and the insurance
industry should be spurred to action by bird flu, which has
affected tens of thousands of farmers and ignited their demand for
the farming insurance services.
But China's meager agricultural insurance services are far from
as satisfactory to either the government or the farmers. There are
currently only two major insurance companies offering agricultural
insurance: PICC Property and Casualty Co Ltd. and China United
Property Insurance Company. Their businesses have been languishing
in recent years.
Agricultural insurers in China are in a dilemma, says Zhou
Weiguo, general manager of the agricultural department of the
Shanghai branch of PICC. If premiums are set according to the
market, most farmers are unable to afford them. But if rates are
lowered, the insurers will go into the red.
The situation has worsened in recent years. China's total
agricultural insurance revenue plunged 20 percent plunge in 2002,
the sharpest drop since 1982, when agricultural insurance was first
launched. The 480 million yuan (US$58 million) of agricultural
premiums made up a poor 0.16 percent of the nation's total
insurance revenue in 2002.
The situation was no better in 2003.
The faltering agricultural insurance business leaves farmers, if
hit by disaster, no option but to wait for government aid. The
avian influenza outbreak in Shanghai alone has led to the culling
of 300,000 birds, while less than 1 percent of the area's 150
million fowl are covered by insurance. Most affected farmers wait
for the government's financial compensation, which is a small
amount for each individual but hugely expensive for the
government.
A farmer surnamed Xu in Shanghai's Jinshan District saw his
30,000 chickens disappear overnight, killed because his farm was
within the unsafe three-kilometer radius of a confirmed outbreak
site. He was paid only six yuan (about 72 US cents) for each
kilogram of chicken, merely covering his breeding costs.
"The disaster destroyed 20 years of effort," says Xu. He has
heard of agricultural insurance, but opted against it because of
the high premium rates and his lack of information about the
companies that might offer such insurance.
Xu's dream of becoming rich has been snuffed out by bird
flu.
"Ignorance about insurance and premium rates that the farmers
can't afford are two major obstacles to the development of
agricultural insurance," notes Xu Wenhu.
Bird flu is just one of many disasters that can wipe farmers
out, but it stimulated the government's attention to providing
adequate financial services to this sector. Farmers' income growth
slowed in the late 1990s and became a top-priority issue for the
new Chinese government, inaugurated last March.
"China's agricultural insurance should be commercial, assisted
by preferential policies established by the government," Xu
says.
The first special agricultural company in Shanghai will be a
commercial operation with financial assistance from the government.
Since 1992, Shanghai has integrated the profitable rural
construction insurance with the agricultural insurance to support
the latter's development, according to Mo Yunhua, a senior official
with the Shanghai agricultural commission.
The city tapped the agricultural department of the Shanghai
branch of PICC to operate that insurance package independently. Its
success not only offset cumulative losses of the previous years,
but also built up an insurance fund reserve of 194 million yuan
(US$23 million).
According to Xu Wenhu, the Chinese Insurance Regulatory
Commission has listed five methods of developing agricultural
insurance. It believes that special agricultural companies are the
ultimate solution.
The government is considering launching more trial programs in
other provinces or cities to test the usefulness and success of
commercial agricultural insurance joined with financial aid, report
sources with the Chinese Insurance Regulatory Commission.
Preferential treatment for farmers in the realms of finance and
insurance has been listed as one of the major policies in the No. 1
Document issued early this year by the State Council, China's
central government.
It was the first time in 18 years that the Chinese government
has released what was once an annual report on agricultural issues.
It announced a string of five No. 1 Documents on agriculture in the
late 1970s and early 1980s, when China first launched its reform
and opening drive and innovations were being made in the farming
sector.
(Xinhua News Agency February 23, 2004)