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Agricultural insurance in Viet Nam


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High-level inter-ministerial workshop held in Hanoi June 6-7, 2017 hosted by the Ministry of Agricultural Development (MARD) of Viet Nam and supported under the Integrating Agriculture in National Adaptation Plans (NAP-Ag) Programme. The meeting was attended by over 75 national and provincial level government officials, including MONRE, MARD, MPI and the Ministry of Finance (MOF), UN and development partners, private sector representatives including insurance companies, as well as non-governmental organisations.

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Agricultural insurance in Viet Nam

  1. 1. AGRICULTURAL INSURANCE IN VIETNAM Dang Kim Khoi Director of Centre of Agriculture Policy (CAP) Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) Ha Noi, 6/2017
  2. 2. AGRICULTURAL INSURANCE GLOBALLY Spain India Germany USA Canada Phillipines Vietnam Japan S Korea China 1791 1938 1950 1978 1982 1990 2001 2003 Source: Adapted from (FAO, 2011), (Mahul, et al., 2012), (Mahul & Stutley, 2010) Nation Crop (%) Livestock (%) Claims Ratio (%) Management type Subsidy* Choice mode of farmers Canada 63-74 74 Private, public 40-60 Voluntary China 10 80 55 Public, PPP No data Voluntary India 14 Public, Private 50 Voluntary for normal, ompulsory for bank lenders Japan 44 94 Public 50 Voluntary, compulsory Philippines 2 Crop: public, livestock: PPP 48-63 Voluntary South Korea 31 35 85 Pool co-insurance PPP 50 Voluntary Spain 80 10 91 Pooled PPP 53-59 Voluntary, compulsory US 80 70 PPP, private 13-67 Voluntary
  3. 3. AGRICULTURAL INSURANCE IN VIETNAM BEFORE 2011 1982 • Started pilot agricultural insurance for rice • Finished after 2 years due to changes in production organization 1993 -1998 • Applied for rice products in 16 provinces • high compensation rate (110%), Market size became smaller 1996 -1998 •Applied for aquaculture and livestock production (dairy cow, catfish), industrial plants & forest fires • Finished because the cost was too large for the operation • Perfunctorily implemented : Rubber and dairy cow 2003-2006 • Groupama: Livestock, crop, property, equipment, accident • 2006 termination because continuous losses 2010 • Bao Minh: Coffee; BIC: Rubber ; ABIC: Dairy cow; GlobalAgRick Inc: Index insurance • Research, pilot scale Appeared some effective models: Unauthorized organization, self- management organization, starting from demand of farmers
  4. 4. POLICY OF AGRICULTURAL INSURANCE BEFORE 2011 Policies encouraged enterprises to expand agricultural insurance market Article 4, Law on insurance business (2000) Preference for the insurance operations to serve the socio-economic development goal, especially agricultural-forestry-fishery development programs Decision 175/2003/QĐ-TTg Encouraged insurance enterprises to research agricultural-forestry- fishery insurance products Decree 18/2005/NĐ- CP Established, implemented and operated mutual insurance organizations Decision 4056/QĐ- BTC - 2006 Researched incentives for enterprises to implement insurance regarding risks in agricultural-forestry-fishery sector Decision 172/2007/QĐ-TTg Researched to develop self-finance funds, insurance funds for disaster Resolution 26- NQ/TW -2008 Pilot agricultural insurance, towards guaranteeing minimum living standards for rural residents
  5. 5. Criteria Unit 2006 2007 2008 2009 2010 Revenue of agricultural insurance Billion VND 0.737 0.833 1.377 1.696 2.450 Compensation of agricultural insurance Billion VND 0.535 0.647 0.344 0.345 0.719 Compensation rate of agricultural insurance % 72.59 77.67 25.31 20.36 29.35 Charge of agricultural insurance / Charge of non- life insurance % 0.012 0.010 0.015 0.010 0.050 Insurance for Only 1% of crop; 0.24% of castle; 0.1% of pig & 0.04% of poultry • Agricultural Insurance accounted for very small proportion in comparison with revenue of insurance sector (0.05%) • Market size gradually became smaller • Farmers expected agricultural subsidies (Source: Insurance Association of Vietnam) AGRICULTURAL INSURANCE IN VIETNAM BEFORE 2011
  6. 6. CONTEXT OF NAIPP Agriculture insurance market tended to “die prematurely” • 8/2008: Resolution No. 26/NQ-TW on agriculture, farmers and rural areas “Agricultural insurance pilot program, towards guarantee minimum living standards for rural residents” •10/2008: Resolution No. 24 /NQ-CP required “building agricultural insurance pilot program” •4/2010: Ministry of Finance completed the building agricultural insurance pilot program • 01/03/2011: Decision No. 315 /2011/ QD-TTg on the national agricultural insurance pilot program during 2011-2013 It took nearly 3 years to issue the Policy Ministry of Finance, Ministry of Agriculture and Rural Development, Insurance Enterprises, Association of Insurance and the local authorities
  7. 7. OBJECTIVES OF NAIPP “Supporting farmer to overcome proactively and compensating for the financial damages caused by natural calamity, diseases, to contribute to guarantee the stable rural social security, promote agricultural production activities” Source: Decision 315/2011/QĐ-TTg Decision 739/QD- BNN-KTHT Decision 1653/QD- BTC Circular 121/2011 /TT-BTC Decision 3035/QD-BTC Circular 101/2012/TT- BTC Decision 358/QD-TTg Circular 96/2013/TT- BTC 4/2011 7/2011 8/2011 12/2011 6/2012 2/2013 7/2013 3/2011 6/2011 9/2011 2/2012 8/2012 5/2013 10/2013 Decision 315/QD- TTg Circular 47/2011/ TT-BNN Decision 2174/QD- BTC Decision 305/QD-BTC Circular 43/2012/ TT-BNN Decision 1042/QD- BTC Decision 619/ QD-TY-TS Decision 2175/QD- BTC Circular 57/2013/TT- BTC Decision 653/QD-TY- DT Sources: CAP research team (2016).
  8. 8. KEY STAKEHOLDERS IN NAIPP Direct, operate the pilot case Product line and insurance information Product fee and subsidy Budget estimate Support Prime Minister Farmers GSO Farmer's Union Women Union Reinsurance Company MoF Steering Committee MARD Steering Committee Province Steering Committee District Steering Committee Commune Steering Committee Insurance Companies Insurance Branches District Province Central Commune Insurance Agencies Insuarance company Metting with the locality Training for insurance Propaganada & mobilization Selling insuarance After-sell service Insuarance company Metting with the locality Training for insurance Propaganada & mobilization Selling insuarance After-sell service FARMER Monitoring, evaluation, feed back
  9. 9. Storm, flood, drought, heavy cold weather, harmful cold weather, frost, saline infiltration, tsunamis, thunderstorms and tornadoes INSURANCE PRODUCTS OF NAIPP
  10. 10. BENEFICIARIES FROM NAIPP - Farmer, agricultural organization (cooperative, farmer association) - 20 provinces implement NAIPP Proportion of support Poor HHs 100% Near-poor HHs 90% Normal HHs 60% Organizations 20%
  11. 11. • 304 016 households particpated in the insurance program • 1 farmer association • Insurance value: 7 747.9 billion VND • Insurance fee: 394 billion VND •Compensation: 701.8 billion VND Source: MOF, 2014 NAIPP’S OVERALL RESULTS Near Poor 15% Other 8% Poor 77% HHs Rice… Livestock HHs 20% Aquaculture HHs 2% 2151 2713.2 2883.7 0 500 1000 1500 2000 2500 3000 3500 Rice Livestock Aquaculture Value Insurance (billion dong) 91.92 83.91 218.18 20.6 15.9 306.8 0 50 100 150 200 250 300 350 0.00 50.00 100.00 150.00 200.00 250.00 Premium (Bilion dong) Compensation rate (%)
  12. 12. ARCHIEVEMENT OF NAIPP • Confirmed as a effective solution of financial, production support for farmers that helping them to have a better life • Created an operation mechanism from central to local level, and continuously improved operation method. • Products of NAIPP has been continuously improved to match the actual conditions • Insurance enterprises took strong effort and suitable support for NAIPP. • Promoted understanding on agricultural insurance for Government agencies, insurers and farmers via communication channels • Contributed to raise awareness and compliance with the production process
  13. 13. •Need diversify insurance packages to meet demand of each farmer’s group and to be suitable with production and natural conditions. • Need promote the market by Government assistances • Need improve policy system and to make institutional and legal framework for agricultural insurance system (to make laws) • Need observe closely in implementation and making quickly decision to change to improve insurance products. • Establish suitable management process to observe and to maximize public and individual investment of insurance companies. •Need a suitable system of re-insurance to limit damage of insurance companies. • Consider cutting down direct support for farmers, changing public investment into re-insurance activities and insurance companies to promote voluntary demand of farmers and to mitigate risk of these companies, then attract more insurance companies investing in agricultural sector. • Establish a system of basic data base for agricultural insurance LESSON LEARNT FROM NAIPP