Woes hit agriculture insurance

The pilot farm insurance plan is causing major headaches  for insurers 

The pilot programme on agricultural insurance, running from March 2011 to June 30, 2014,  has been carried out in 20 provinces and cities according to Decision 315/QD-TTg. This policy aims to stabilise production and income of farm communities and support implementation of social welfare policies. Around 200,000 farming households have joined this programme so far with the total premium of over VND220 billion ($10.5 million).

“In the process of implementation, insurance companies had to bear a big financial burden because the large number of contracts and big damage lead to high compensation for these companies,” said Trinh Thanh Hoan, director of Insurance Supervisory Authority under the Ministry of Finance (MoF).

The insurance firms chosen to pilot the programme by the MoF are Bao Viet Insurance Corporation, Bao Minh Joint Stock Corporation and Viet Nam Reinsurance Corporation. All have shown a big financial loss after two years.

Specifically, in the first four months of this year, Bao Viet Insurance saw premium revenue of only VND13.6 billion ($653,850), much lower than compensation of VND300 billion ($14.4 million). In 2012, the figures were respectively VND172 billion ($8.3 million) and VND62.6 billion ($3 million).

Bao Minh faces the same situation. Its compensation for the first four months of 2013 reached VND69.6 billion ($3.34 million), higher than premium revenue of VND58.9 billion ($2.8 million). In 2012, the figures were VND34.4 billion ($1.65 million) and VND58.7 billion ($2.8 million).

Meanwhile, Vinare reported it suffered a loss of VND300 billion (($14.4 million), with the revenue of VND204 billion (($9.8 million) while the total of compensation commission up to VND534 billion ($25.7 million).

Aquaculture insurance, which is considered “the most difficult kind of agricultural insurance”, according to Deputy Minister of Finance Tran Xuan Ha, is one of the main reasons for big compensation for insurance firms in the past time.

A representative of Bao Minh said there remained many legal loopholes for seafood insurance which made it difficult for insurers in compensation

“Due to specific characteristics of aquaculture which is flat damage in the wide area, it is hard for insurers to check and appraise the damage exactly. Besides, it appeared insurance frauds happened which made the compensation value increase,” said the representative.

In addition, he added, in fact, in the process of implementation programme, the farming households holding insurance policies did not reached the anticipated number which impacted on premium revenue of insurance companies.

Bao Minh report’s also showed that total premium of this firm revenue was only one tenth of the initial expectation.

“In 2012, the business result of agricultural insurance in the pilot programme is really bad. 2013’s plan still see a big proportion for insurance of seafood products,” said a representative of Vinare.