A starchy safety net

A starchy safety net

Crop insurance for rice farmers is quickly gaining a following

A rice farmer works the fields in Nakhon Ratchasima. Crop insurance launched in Thailand in 2011. (Prasit Tangprasert)
A rice farmer works the fields in Nakhon Ratchasima. Crop insurance launched in Thailand in 2011. (Prasit Tangprasert)

The stage is set for practical risk management for grassroots farmers, who chance natural disasters ruining crops every year, through a micro-insurance policy for rice harvests, a flagship Thai commodity.

A crop insurance project in Thailand was launched in 2011 via integration of a public-private partnership, providing a risk management tool for farmers.

The government allocated a budget to compensate farmers participating in the scheme for insurance premiums.

As of Sept 17, there are 30.4 million rai of rice paddies that have been insured, a penetration rate of 56.5%, which is an increase from 27.6 million rai the previous year.

Total rice cultivation land in Thailand is estimated at 53.9 million rai.

"We are quite shocked there is more than 2 million rai where rice farmers paid their own money for insurance fees for protection of rice fields," said Kheedej Anansiriprapa, executive director of the Thai General Insurance Association (TGIA). "They are willing to pay money to manage risks because they have learned about crop insurance and risk management through field practice."

Normally the cultivation cost, from the initial day to harvesting, is around 4,000 baht per rai.

If there is not a natural disaster and all crops can be harvested, farmers can sell rice at 6,000-7,000 baht per rai, depending on the quality of planted seeds, said Nimit Sookthongkong, assistant director of the Bank for Agriculture and Agricultural Cooperatives (BAAC) at the Nakhon Si Thammarat branch.

"Insurance protection can help compensate for initial rice cultivation costs, such as seeds, wages and fertiliser," Mr Nimit said. "Although this does not include the cost of time and care from cultivation until harvest, at least farmers will not be insolvent."

The crop insurance claim will be paid by the TGIA to farmers' BAAC bank accounts within about a week after their rice fields are announced as "natural disaster areas", he said.

This is the first year the government has adjusted some conditions for crop insurance by allowing farmers to have a second tier of protection worth 240 baht per rai on top of the first-tier protection worth 1,260 baht.

Farmers spray a rice field in Ayutthaya's Sena district. A crop insurance project in Thailand was launched in 2011, through an integration of public-private partnership, to provide a risk management tool for farmers through an insurance system. WICHAN CHAROENKIATPAKUL

The insurance premium for the first tier is 85 baht per rai, and the government subsidises 60%, with the rest provided by the BAAC.

For second-tier protection, the insurance premium is allotted at 5 baht per rai for the green zone, 15 baht for the yellow zone and 25 baht for the red zone.

The colours represent the level of risk exposure for different locations of rice fields.

Rice farmers who are BAAC customers do not have to pay an insurance premium, but they are required to register and must come to the bank to express their intention to join the crop insurance project.

Farmers who are not BAAC customers must pay a sum of 34 baht per rai for the first-tier protection.

According to the Office of the Insurance Commission (OIC), there were 1.38 million rai of rice fields damaged by natural disasters between Jan 1 and Sept 17 this year. Insurance claims have already been paid worth more than 1.74 billion baht, equivalent to a loss ratio of 80%.

RISK-POOLING PRINCIPLE

OIC secretary-general Suthiphon Thaveechaiyagarn said rice insurance is a type of micro-insurance policy using the principle of risk pooling to help diversify risk through the TGIA.

A farmer harvesting paddy in Narathiwat province. Plantations in the North and Northeast have suffered from drought. PATIPAT JANTHONG

The objective is to allocate risk acceptance to insurance companies.

In addition to an insurance policy for rice farmers, there are also insurance policies for fisheries.

This concept can be implemented for other crops such as corn, of which there are 5-6 million farmers cultivating farmland, as well as cassava and durian, he said.

Mr Kheedej said the more farmers learn to manage risk by themselves, the better the country's economy.

The OIC and TGIA have been working together to launch another insurance product for different types of fruit and economic crops. It has yet to receive support from the government budget.

Thanks to rice insurance, crop insurance now comprises 1.5% of total premiums in Thailand, up from 0.1% in 2011, he said.

Mr Kheedej expects insurance premiums from crop insurance in Thailand to reach 3% over the next five years, driven by farmers' awareness of risk management.

"We are talking with the Fiscal Policy Office about the possibility of launching an insurance policy for cassava next year," he said. "The Sugarcane Planters Association also talked to us about an insurance policy for sugar cane."

LACKING STATS

The main problem for crop insurance in Thailand is a lack of statistics, Mr Kheedej said.

Morning light reflects on rice field in Amnat Chareon's Senangkhanikhom district. A crop insurance project in Thailand was launched in 2011, through an integration of public-private partnership, to provide a risk management tool for farmers through an insurance system. PARITTA WANGKIAT

"We have information and statistics about plantation and cultivation, but no statistics on [crop] losses to calculate premiums," he said. "We should have statistics for a period of at least 5-10 years."

This is the reason why micro-insurance for farmers is starting with rice, because farmers of this crop make up the largest chunk at around 20 million.

There are sufficient statistics on rice farming collected by the Agricultural Extension Department under the Agriculture and Cooperatives Ministry, Mr Kheedej said.

In Hua Sai district of Nakhon Si Thammarat, the red area, considered susceptible to natural disasters, has a huge cultivation area of 123,924 rai. The crop insurance penetration rate stands at 74.5% there, higher than the country's average penetration rate of 51.2%.

Mr Nimit of the BAAC said the number of farmers who splashed out for second-tier protection is lower because the rice cultivation season in the southern region just started in October and will run through December.

The partnership between the BAAC, OIC and TGIA hopes to educate rice farmers on crop insurance, helping them understand its importance.

The goal is to expand to other crops so more farmers can realise the benefits of micro-insurance, Mr Nimit said.

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