A Retrospective Study on the Pilot Agriculture Insurance Programme in Zhejiang Province

FANG Weihua, ZHONG Xingchun, QIAO Yang

State Key Laboratory of Earth Surface Processes and Resources Ecology
(Beijing Normal University), Beijing 100875, China;
Academy of Disaster Reduction and Emergency Management,
Ministry of Civil Affairs & Ministry of Education of China, Beijing 100875, China;
PICC Property and Casualty Company Limited, Beijing 100052, China

Agriculture insurance in China experienced three stages, i.e., the primitive period 1950-1958, the recovering and exploring period 1982-2007, and the rapid developing period after 2007. The central government supported agriculture insurance vigorously since its recovery in 1982. In 1992 the premium income reached 820 million RMB, and later shrunk gradually to 300 million RMB in 2001. Premium of per agricultural family was less than 2 RMB. In 2007, the central government began to promote pilot agriculture insurance programme and substantially increased financial subsidies. Accumulated Subsidies from governments of all levels reached 6.5 billion RMB in 2008. Around 26 million ha crops and 3.4 million livestock were covered. The accumulated insured sum achieved 170 billion RMB and 110 million families benefited from the insurance with total indemnity of 6.9 billion RMB. It was nationwide balance in overall.

Zhejiang Province began to develop agriculture insurance programme from late 2005, covering rice, hog, greenhouse vegetable, watermelon, etc. From 2006, its Pilot Agriculture Insurance Programme (PAIP) was implemented, accompanied with the foundation of Policy Agricultural co-Insurance Body (PAIB). Premium subsidy was set to at least 35% of the premium. The PAIB would get governmental subsidies if the indemnity exceeded 2 times of premium, while the payment limit was 5 times. Premium income in 2006 was only 10.1 million RMB but the indemnity amount reached 22.6 million RMB. The deficit for the PAIB was worse in 2007 with 29 million premium income and 80 million indemnities.

PAIP in Zhejiang was operating with achievements and problems. Firstly, the premium rating demanded more quantitative evaluation, especial in loss ratio and risk zoning. Secondly, agriculture is in high risk due to factors like frequent natural disasters and price fluctuations, which leads to high premium rate. This was conflicted with the relatively low purchasing capacity of Chinese peasants and harmful to their participation enthusiasm. Meanwhile, it was obvious that the insurers were in deficit in agriculture insurance, even with subsidies. How to balance the benefits of both peasants and insurers in the market economy remains a very challenge issue. Additionally, relationship between insurance and government relief calls for more discussion.

Since agriculture is the primary industry of China and insurance becomes more and more critical in its risk governance, extending the agriculture programme to other provinces requires a retrospective study. This paper will focus on the review of agriculture insurance programmes in detail.

Keywords: Agriculture, Insurance, Zhejiang Province