Editor's note: Although the Government has decided to pilot agricultural insurance for more than 10 years, every time a natural disaster strikes, thousands of farmers are left with nothing, while insurance still seems to be a strange word to them. VietNamNet's series of articles "Making agricultural insurance a real lifesaver for farmers" hopes to add another perspective to solve this problem.

'Lost the cow' then think of insurance

Agriculture was the sector that suffered the most damage from the devastation caused by typhoon No. 3 (Yagi).

Reports from northern provinces from Quang Ninh to Nghe An show that the total aquaculture area damaged is about 23,595 hectares; the number of cages damaged and swept away is about 4,592 cages. The initial estimated damage to aquaculture is up to more than 2,500 billion VND.

Mr. Cao Tuong Huy, Chairman of the People's Committee of Quang Ninh province, said that the economic damage in Quang Ninh province amounted to VND24,200 billion, causing many people and businesses to lose almost all their assets; many customers of credit institutions were no longer able to repay their debts, especially in the fields of agriculture, forestry and fishery (their aquaculture rafts drifted away, crops were broken and completely collapsed),...

According to preliminary statistics from the Ministry of Agriculture and Rural Development, by the end of September 18, storm No. 3 and its aftermath had killed 22,808 livestock and more than 3 million poultry, with the five provinces suffering the most damage: Hai Phong, Quang Ninh, Yen Bai, Hanoi and Thai Nguyen.

In Hai Phong, Director of the State Bank of Vietnam Hai Phong Branch, Ms. Nguyen Thi Dung informed that Hai Phong has 13,181 affected customers, with a total outstanding debt of VND 27,097 billion, accounting for 11.5% of the total outstanding debt. Of which, 12,200 customers in the agriculture, forestry and fishery sector were affected with an outstanding debt of VND 1,563 billion.

“This loss threatens to affect bad debt of banks in the city this year. Currently, the bad debt ratio in Hai Phong is 5%,” said Ms. Dung.

In Lao Cai, Mr. Do Quang Huy, Director of the State Bank of Vietnam, Lao Cai Province Branch, said that the area of ​​rice, corn, crops, fruit trees, and medicinal plants in the whole province was damaged up to 6,160 hectares. Of which, 45,000 banana trees, 400,000 cinnamon trees, 353 hectares of aquatic products, 3,050 tons of commercial fish, over 123,000 fish fry were dead; more than 43,000 livestock and poultry died with over 1,000 barns.

Faced with huge losses to the agricultural sector, the story of agricultural insurance is once again mentioned.

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Aquaculture cages in Quang Ninh were destroyed by the storm. Photo: Pham Cong

As someone who has worked in the agricultural sector for more than 10 years, Mr. Nguyen Van Dat (Hai Duong) said that all 2 hectares of crops and 4 hectares of fruit trees that he had invested in Chi Linh and Kinh Mon districts were lost, with a total loss of about 600 million VND. "No one could have imagined that one day they would be swept away by a storm like this," Mr. Dat said sadly.

Most of the investment capital was borrowed by Mr. Dat from the bank. When asked about agricultural insurance, he said he had never thought about it and had never heard anyone talk about it.

In fact, because it is not really attractive, there are currently very few insurance companies providing agricultural insurance products. Mr. Ngo Trung Dung, Vice President and General Secretary of the Insurance Association, said that the Government has assigned 4-5 insurance companies to implement this type of insurance.

In particular, Agribank Insurance (ABIC), Bao Viet Insurance and Bao Minh Insurance are enterprises that have been selected for pilot implementation.

Even ABIC, a company whose customers are 95% farmers, estimated that ABIC's compensation after storm No. 3 was only VND150 billion. This figure partly reflects the level of farmers' participation in agricultural insurance.

“The government really encourages the implementation of agricultural insurance because it is related to crops and livestock, because farmers invest a lot of money in it. The problem is that people are not interested in agricultural insurance, only when natural disasters occur and many people fall into bankruptcy do they think about insurance,” said Mr. Dung.

Why is agricultural insurance "turned away"?

According to Associate Professor, Dr. Nguyen Van Dinh, former Head of the Insurance Department, National Economics University, for farmers, a household cultivating 2-3 hectares of rice is a lot, but for farm owners, they can cultivate dozens of hectares. Similarly, a large-scale fish cage, with an investment cost of up to tens of billions of VND, if damaged by natural disasters or epidemics, the investor will be left empty-handed.

Having conducted in-depth research on the insurance sector for many years, Associate Professor, Dr. Nguyen Van Dinh said that Vietnam has piloted the agricultural insurance model twice.

Most recently, in 2013, the Government issued Decree 100 on piloting agricultural insurance in 21 provinces and cities. The insured subjects are rice plants, livestock, cattle, fruit trees, aquaculture, etc.

However, the results were not as expected. Up to now, both businesses and people are still not interested in this product.

Mr. Dinh pointed out 4 reasons leading to this situation, which are limited propaganda work; insurance businesses themselves are not interested in agricultural insurance because the insurance premiums collected are very low, while reinsurance is difficult.

“Reinsurance business of enterprises is often carried out abroad, while the risk management assessment is not accurate, leading to distrust from foreign countries. Moreover, our agricultural production scale is still small, and the product design of enterprises is not really attractive to farmers,” said Associate Professor, Dr. Nguyen Van Dinh.

In addition, Mr. Dinh said that the biggest risk for agricultural insurance is moral risk, so it is very difficult to implement.

Agreeing with the above viewpoint, Vice President of the Insurance Association Ngo Trung Dung admitted that the difficulty for businesses is risk management. Businesses cannot measure the amount of shrimp and fish in the pond, so customers declare only the amount they know.

Recalling the story of fishing boat insurance, Mr. Ngo Trung Dung analyzed that the State has policies to support fishermen to go far out to sea, banks provide loans to buy boats, and insurance companies also provide fishing boat insurance packages for fishermen. However, there have been cases where fishermen have taken advantage of insurance by swapping the boat's machinery and then sinking the boat, then claiming compensation from the insurance company.

A fishing boat costs several billion VND, of which the machinery accounts for 2/3. Only fishermen know about replacing broken or old machinery because it is far offshore and no business can monitor it.

According to Associate Professor, Dr. Nguyen Van Dinh, agricultural insurance in particular and insurance in general bring peace of mind to people. The expert recalled the insurance textbook of Saint Mary's University (Canada) that he had translated to serve his teaching work, which included the sentence: "Insurance is like a handrail of a staircase. If you go up the stairs with a handrail, you will feel more secure."

He cited the example of health insurance, where people only pay a few hundred thousand per year, but if they get sick and have to go to the hospital for treatment, they will see its benefits.

Exhausted after the fierce storm, cage owners are burdened with a debt of thousands of billions of dong . More than 300 grouper cages raised by Mr. Ba and his wife in the Quang Yen coastal area are left with nothing but broken wooden boards. After the storm and flood, not only Mr. Ba and his wife lost all their property, but many other farmers also had to shoulder a debt of thousands of billions of dong.