After the devastating impacts of Typhoon Yagi, experts propose making agricultural insurance mandatory when obtaining bank loans, aiming to provide a lifeline to farmers facing catastrophic losses.
According to Mr. Hoang Trung, Deputy Minister of Agriculture and Rural Development, Typhoon Yagi submerged 200,000 hectares of rice fields, causing approximately 3 trillion VND ($122.45 million) in losses.
Additionally, 50,612 hectares of crops and 38,104 hectares of fruit trees were damaged, resulting in losses of about 1.25 trillion VND. The typhoon also destroyed thousands of aquaculture cages, with initial damage estimates reaching 2.5 trillion VND. Livestock farmers suffered nearly 2 trillion VND in losses.
These figures only represent estimates as of September 18.
As an agricultural nation, Vietnam faces annual losses from natural disasters and diseases estimated at 1.5% of its GDP. Farmers need assurances for their labor and investment, and agricultural insurance represents a critical safety net.
The Prime Minister's Decision No. 315 in 2011 initiated a pilot agricultural insurance program from 2011 to 2013 in 20 provinces and cities. To implement this policy, the government issued Decree No. 58 in 2018 regarding agricultural insurance and Decision No. 13 in 2022 on supporting agricultural insurance policies.
Recently, on September 16, Agribank Insurance Company (ABIC) and the Center for Farmer and Rural Support (Vietnam Farmers' Union) signed a strategic cooperation memorandum, marking a significant step in promoting agricultural insurance and sustainable rural development in Vietnam.
Mr. Pham Tien Nam, Vice Chairman of the Vietnam Farmers' Union, noted that agriculture and rural areas are highly susceptible to risks, as evidenced by the recent typhoon.
For instance, in Van Don, Quang Ninh, where approximately 3,000 hectares of aquaculture were completely destroyed, the losses were staggering.
According to preliminary estimates, the total damage to customers affected by Typhoon No. 3 amounts to about 40 trillion VND, with the insurance industry expected to pay out about 10 trillion VND.
ABIC, with 95% of its clients being farmers, estimates its compensation for losses due to the typhoon at 150 billion VND. This figure underscores the minimal penetration of agricultural insurance, especially given ABIC's active role in the sector.
Bao Viet Insurance's agricultural insurance project includes three products: rice crop insurance, livestock insurance, and shrimp/fish insurance. Coverage extends to yield reduction due to natural disasters or diseases for rice, death due to natural causes or disease for livestock, and costs associated with shrimp/fish cultivation due to declared disasters or diseases.
Mandatory insurance purchase required
Decree 58 emphasizes the supportive role of insurance companies and banks. However, currently, banks only implement insurance for loan packages, with clients paying for insurance associated with their bank loans. In the event of misfortune during the loan period, the insurance company assists in covering the loan repayments.
According to a banking expert speaking to VietNamNet, the high risk associated with livestock and crops means many are reluctant to insure them.
"Insurance is a contract; insurers can ask clients to implement risk prevention measures, but farmers may not comply. If they do purchase insurance, when risks materialize, insurers often look for reasons to deny claims, thus nullifying the essence of insurance," the expert explained.
The expert suggested administrative measures to involve banks genuinely in agricultural insurance, such as preferential loan interest rates for enterprises and farmers who purchase insurance for farming activities.
"A regulatory requirement should be established making agricultural insurance mandatory when obtaining bank loans. Otherwise, we continually face requests for bank support or even debt forgiveness whenever natural disasters or diseases strike," the expert stated.
The Ministry of Finance reports that in the three years following the pilot implementation of agricultural insurance under Government Decision 315, compensation totaled 701.8 billion VND as of June 20, 2014. This included 669.5 billion VND for aquaculture (95.4%), 19 billion VND for rice (2.7%), and 13.3 billion VND for livestock (1.9%).
During this period, 304,017 households and organizations participated in agricultural insurance, highlighting the growing, albeit slow, integration of insurance into the agricultural sector.
Source - Vietnam Net
