Millions of Chinese farmers will hopefully no longer risk their
fortunes on the weather or be hurt helplessly by calamities like
bird flu, because the government is mulling vigorously expanding
the still small-in-size agricultural insurance.
Wu Dingfu, chairman of the Chinese Insurance Regulatory
Commission, said the government is exploring ways of expanding the
insurance to protect its 900 million farmers from natural
disasters.
He said China will highlight the promotion of commercially
operated agricultural insurance with financial and policy support
from the government. Some pilot programs will get underway soon in
two or three provinces or cities, according to the chairman.
China's first special agricultural insurance company is to be
set up and operational within the year in Shanghai. The company,
with capital of 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, said the government and the insurance
industry should be moved 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 adequate as both the government and farmers desire. There are
currently only two major insurance companies offering agricultural
insurance in the country, namely, PICC Property and Casualty Co.
Ltd. and China United Property Insurance Company. Their businesses
are shrinking further over years because of loss of money.
Agricultural insurance in China is in a dilemma, according to
Zhou Weiguo, general manager of the agricultural department of the
Shanghai branch of PICC Property and Casualty Co. Ltd. If the
commission rate was set according to the market level, most farmers
were unable to afford it. If the rate was lowered to within
farmers' capacity, insurers would go into the red.
The situation was worsening in recent years. A 20 percent plunge
was reported in 2002 in China's total agricultural insurance
revenue, the sharpest fall since 1982, when agricultural insurance
was first launched in the country. The 480 million yuan (US$58
million) of agricultural premium insurance made up a poor 0.16
percent of the nation's total insurance revenue in 2002.
The following year of 2003 was no better.
The lagging agricultural insurance leaves farmers, if hit by big
disasters, no other way out but to wait for government aid. The
bird flu outbreak in Shanghai alone has led to the culling of
300,000 poultry, while less than 1 percent of its total 150 million
poultry has been covered by insurance. Most affected farmers wait
for the government's financial compensation, which is a small
amount for each farmer but a big spending in total for the
government.
A farmer surnamed Xu in Shanghai's Jinshan District saw his
30,000 chickens killed overnight for his farm was less than the
safe three kilometers away from the bird flu site. He was paid only
six yuan (US$72) for each kilogram of chicken, merely covering his
cost of breeding.
"The disaster destroyed my 20 years of efforts," said Xu who has
been raising chickens for over two decades. He had heard of the
agricultural insurance, but opted against it because of the high
commission rate and knowing little of which companies might run
such insurance.
The farmer's dream of becoming rich was crushed by bird flu.
"Ignorance of insurance and commission rates higher than
farmers' affordability are two major obstacles barring the
development of the agricultural insurance," Prof. Xu Wenhu
said.
Bird flu is just one of many disasters that rendered farmers
helpless. Fortunately, it has roused the government's attention to
providing adequate financial services to support farmers. Their
income growth slowed down in the late 1990s and became a
top-priority issue for the new Chinese government that was
inaugurated last March.
"China's agricultural insurance should be a commercial one,
assisted with government preferential polices," Xu Wenhu said.
The first special agricultural company in Shanghai will be a
commercial operation with financial aid from the government.
Shanghai since 1992 has integrated the profitable rural
house-building 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 entrusted the insurance package to be independently
operated by the agricultural department of the Shanghai branch of
PICC Property and Casualty Co. Ltd. The operation not only offset
cumulative losses in the past years but built up an insurance fund
reserve of 194 million yuan (US$23 million).
According to Prof. Xu Wenhu, the Chinese Insurance Regulatory
Commission listed five modes of developing the agricultural
insurance, and special agricultural companies were expected to be
the final solution.
The government is considering launching more trial programs in
other provinces or cities to test the usefulness and success of the
agricultural insurance mode of commercial operation plus financial
aid, according to sources with the Chinese Insurance Regulatory
Commission.
Financial and insurance preferential treatment for farmers have
been listed as one of the major polices stated in the "No. 1
Document" that stressed agriculture and farmers' income and was
issued early this year by the State Council, China's central
government.
It was the first time in 18 years that the Chinese government
released its yearly number one document on agricultural issues. It
announced a string of five "No. 1 Documents" on agriculture in the
late 1970s and early 1980s when China first kicked off its reform
and opening drive, when breakthroughs had been made in
agriculture.
(Xinhua News Agency February 23, 2004)