Agriculture Insurance in thePhilippines

Today’s Dilemmas

• In practice, agricultural or crop insurance is really an adjunct to a whole set of risk management measures of which adequate farm management practices constitute the most important. Insurance by itself is no substitute for good production practice. The test of a good insurance programme is the cost versus the expected benefits and the sustainability thereof.

• Diverse Objectives for Value Chain Analysis– Identify existing gaps and inefficiencies by

analyzing cost structure of the system and seek ways to reduce these costs and increase productivity

– To understand and improve the positions of certain stakeholders

– Unlocking additional value in the supply chain

AGRICULTURE Ex. RICE – PLANTING SEASON

Seedings Planting Nurturing or Growing Harvesting

Pests | |

Excessive Pesticide | |

Fire | | | |

Irrigation | |

CAT Perils

(EQ, TYPHOON, FLOOD)| |

Optional:

Landslideon hillside plots

| |

Volcanic Eruption

Near active volcanoes (to include volcanic ash damage, lahar, etc..| |

TRANSPORT & WAREHOUSING RISKS

Storage Loading Transit StorageUnloading

Pests | |

Fire | |

CAT Perils

(EQ, TYPHOON, FLOOD)| |

Pilferage | |

Hijacking | |

Collapse of Bridge | |

Overturning of vehicle | |

Collision/Accident | |

MARKET RISKS

Storage Risks Display Risks Loss of Value

Pests | |

Fire | |

CAT Perils

(spillage/robbery)| |

(wetting/heat)

• Single Peril Insurance… Yes• Multiple Peril… No• Private sector can deliver sustainable and actuarially

fair• single peril insurance products but not multiple peril• products.• Examples: hail, rain, fire, wind• But single peril is not interesting to most resource

limited• farmers. Poor farmers want yield and/or revenue• protection at an affordable price.

Traditional Multiple Peril Insurance

• Programs Unsustainable

• • Moral Hazard

• • Adverse Selection

• • High Administration Costs

• • Pricing Dilemma: Sound pricing would make it unaffordable. Subsidized pricing represents fiscal cost that worsens as national income levels fall and size of farm population rises.