Agricultural insurance plays an increasingly vital role in mitigating risks in agriculture, contributing to the stable and sustainable development of this crucial sector, particularly amidst the pursuit of rural revitalization. However, the impact of agricultural insurance is far from its potential. Surprisingly, even with government subsidies reaching up to 80%, the coverage rate of agricultural insurance remains dismally low in certain regions, with less than one in 1,000 farmers opting for coverage. Why are farmers reluctant to embrace insurance despite substantial government incentives? What challenges does agricultural insurance face today?
Agriculture is both the cornerstone of our nation's economy and its most vulnerable sector, with limited international competitiveness. The inherent uncertainties and uncontrollable variables inherent in agriculture create a fragile environment. In contrast, the true establishment of the insurance industry only began around 1980, leaving us with several decades of development lag compared to Western counterparts. Despite the significant progress made, there remains a notable disparity in insurance maturity. Curiously, even with increased government support and encouragement in recent years, evident through rising agricultural insurance subsidies and expanded coverage, the agricultural insurance landscape is still characterized by farmer reluctance to insure and a lack of market participation. What is causing this paradox?
The foremost obstacle is complexity. The Insurance Data Center conducted a survey among non-insured farmers, cooperatives, leading enterprises, co-organizers, and local governments. The primary reasons cited for not purchasing agricultural insurance included "insufficient compensation," "complex procedures," and "unaffordable premiums." Additionally, farmers hold reservations about insurance companies' reliability. Agriculture, due to its inherent vulnerability, often confronts substantial losses caused by phenomena like blizzards and heavy rains. Agricultural activities are profoundly influenced by natural elements, making compensation likely. Remarkably, the agricultural insurance industry has recorded an average comprehensive loss ratio exceeding 120%. This high loss ratio contradicts the profit-oriented management objectives of most commercial insurance entities. To ensure viability, some local crop insurance rates skyrocket to 9% or 10%. Such a challenging landscape dissuades certain insurance companies from entering the rural insurance market. Consequently, the remaining options could involve dubious companies, casting a shadow of doubt over the entire industry.
Another significant challenge lies in industry barriers. Essentially, insurance is a probabilistic game built upon the "law of large numbers." However, the idiosyncratic risks of agriculture complicate the calculation of probabilities without substantial data. Consequently, agricultural insurance encounters an isolated predicament due to the dearth of relevant data. Additionally, the agricultural market is notoriously complex and diverse, exhibiting stark differences within a single province in terms of geography and agricultural production. These deep-rooted industry barriers pose significant challenges to the expansion of agricultural insurance.
In essence, the market for agricultural insurance appears entrenched in a complex nexus of challenges, encompassing complexity, unreliability perceptions, high loss ratios, and industry-specific barriers. This situation makes it difficult for traditional rural players to penetrate, let alone major industry players. While agricultural insurance holds enormous potential to safeguard farmers and enhance agricultural stability, resolving these multifaceted challenges is essential to unlocking its full potential and enabling it to genuinely fulfill its role as a protective and stabilizing force in the realm of agriculture.
