Insurance plan

PHL needs a reasonable farm insurance plan

Agriculture is an inherently risky business due to the many uncertainties farmers face. But changing weather conditions that have made agricultural production more difficult have increased the risks facing agricultural actors. The increasing frequency of strong typhoons and droughts has created additional difficulties in boosting production. Due to climate change, local farmers are usually at the mercy of drought or severe typhoons hitting their farms and wiping out their crops. (See “El Niño damage to farms doubles to 2.68 billion pesos,” in BusinessMirror, March 28, 2019).

One of the mechanisms available to minimize the risks faced by farmers is agricultural insurance offered by the state through the Philippine Crop Insurance Corp. (PCIC). The main mandate of the agency which is now attached to the Ministry of Finance is to provide insurance protection to farmers against losses resulting from natural calamities, plant diseases and pest infestations of their to play and corn crops, as well as other crops. The company also provides protection against damage/loss to non-farm agricultural assets including but not limited to machinery, equipment, transportation facilities and other related infrastructure due to insured perils.

However, a study by a team from the World Bank’s Disaster Risk Finance and Insurance Program found that despite the rapid increase in subsidies received by the PCIC from the national government, agricultural insurance has not reaches only a third of the country’s farmers. The study also found that the insurance provided by PCIC is also not well targeted to ensure taxpayers get value for their money. (See, “PHL to revise agricultural insurance scheme”, in the business mirror, June 6, 2022). DRFIP Senior Financial Sector Specialist Benedikt Signer, who presented the findings of the study, said the current agricultural insurance scheme provides neither value for money to the Filipino taxpayer nor adequate protection for farmers. .

PCIC’s insurance products are not suitable for the majority of Filipino farmers, especially subsistence farmers. Signer also noted that his paid claims are often late and do not adequately reflect losses. Moreover, PCIC enjoys a de facto monopoly in the Philippine agricultural insurance market, which discourages the entry of new players.

It would be good if the new administration gave priority to revamping the local agricultural insurance scheme to respond effectively to the need to increase food production. Policy makers should take note of the recommendations made by the World Bank study and use it as a possible guide. The study cites several reforms that should be considered by the new administration to make the country’s agricultural insurance scheme more responsive to the needs of local farmers.

The government should also explore partnerships with organizations, such as the International Fund for Agricultural Development, which has launched a project with Vietnam to strengthen the supply of agricultural and climate risk insurance for small producers. Dr Tran Cong Thang, Director General of the Institute of Policy and Strategy for Agriculture and Rural Development, said that the agricultural insurance development strategy recommended by IFAD is one of the important elements of Vietnam’s national agricultural insurance strategy.

Citing the need to urgently address the country’s looming food crisis, President-elect Ferdinand “Bongbong” Marcos Jr. said on Monday he would temporarily lead the agriculture ministry. Farmers hailed his decision, as they now have the opportunity to communicate directly to the president the urgent need to protect planters, which is the most important step in ensuring the country’s food security.