Agriculture Insurance in the Philippines Todays 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

AGRICULTUREEx. RICE – PLANTING SEASON Seedings Planting Nurturing or GrowingHarvesting Pests | | Excessive Pesticide || Fire | | | | Irrigation | | CAT Perils (EQ, TYPHOON, FLOOD) | | Optional: Landslide on hillside plots | | Volcanic Eruption Near active volcanoes (to include volcanic ash damage, lahar, etc.. | |

TRANSPORT & WAREHOUSING RISKS Storage Loading TransitStorage Unloading Pests | | Fire | | CAT Perils (EQ, TYPHOON, FLOOD) | | Pilferage | | Hijacking | | Collapse of Bridge | | Overturning of vehicle | | Collision/ Accident | |

MARKET RISKS Storage Risks Display RisksLoss 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.