Promotion of Crop Insurance in ASEAN

through the Public and Private Partnership

KICK-OFF WORKSHOP

Crop Insurance Case Studies

February 27, 2024

Bangkok, Thailand
Case Studies: Japan
Historical Background of Agricultural Insurance

1947 - 1960 1961 - 1980 1981 - 2017 2018 - Present

 1947: Agricultural  Applied premium  Diversified the  2018: New
Agricultural Insurance Scheme

Disaster Indemnity rates based on premium rates Agricultural

Act started. local risks. based on local Insurance Act
risks and payout started.
 Premium rates  The government
history.
were almost the subsidized 50%  The scheme
same for all the of the lowest  The government changed to
farmers. premium rates in subsidized 50% of voluntary
the country. the premium rates. insurance for all
 Compulsory for
the farmers.
rice farmers with  Compulsory for  Compulsory for
more than 0.1 ha rice farmers with rice farmers with  Introduced
cultivate area. more than 0.3 ha more than 0.2 – revenue
cultivate area. 0.4 ha depending insurance and
on the area. regional index
insurance.
 Facilitated  1961: Agricultural  Enhanced  Removed tariffs on
agricultural Basic Act: To agricultural imported products
Policy Directions

modernization increase the competitiveness to

 Utilize ICT to
agricultural cope with trade
 Strengthened food improve farm
productivity liberalization of
production system management
agricultural
 Diversified crops to
 Increased food production  Facilitate exports
cope with
self-sufficiency of agricultural
oversupply of rice
production
production
3
Key Takeaways: Agricultural Insurance in Japan

The agricultural insurance scheme should be aligned with

Policy
the country’s agricultural policy and farmers’ situation

“food security” “crop insurance” to

to “revenue insurance” to support
“export oriented” different types of farmers

Farmers Farmers have been directly involved in the operation of

agricultural insurance scheme
Farmers’ groups have carried High insurance penetration
out registration and loss rate: Approx. 80% of total
survey paddy area

Insurance Adoption of the low operational cost schemes

type
Loss assessment survey Introduction of revenue
should be carried out for insurance and regional index
individual crop insurance insurance
(no need loss assessment survey)
4
Overview: Agricultural Insurance Schemes in Japan

Agricultural Mutual Aid Revenue Insurance

Legal basis • “Agricultural Disaster Indemnity Act” • Newly introduced in 2019 based on
enacted in 1947 “Agricultural Insurance Act”
• Amended as “Agricultural Insurance Act”
in 2018

Purpose Farmers contribute to the agricultural mutual
aid associations, and in the even of damage,
the associations give payouts to the farmers.
It covers all the natural disasters.
It broadly compensates for yield and price
declines caused by natural disasters and
other reasons for income reductions. It
targets farmers who file a blue return tax
system.

Types Paddy, livestock, fruit trees, field crops, Entire sales revenue from agricultural
greenhouse, etc. products. NOT specified items.

Risk Wind, flood, drought, cold weather, snow, Loss due to natural disasters, price decrease
coverage and other weather-related disasters for agricultural products, and other reasons
(including earthquakes and volcanic for agricultural income reduction which
eruptions), fire, pests and diseases, birds farmers cannot manage themselves.
and animals damage, etc.

Subsidies The government subsidizes for 50% of the The government subsidizes for 50% of the
premiums. Also, the government provides premiums.
financial support for administrative costs for The premiums will decrease in case if there
agricultural mutual aid associations. are no payouts.
5
Agricultural Mutual Aid Scheme
Agricultural Mutual Aid Scheme

Agricultural insurance scheme is called “Agricultural

Mutual Aid Scheme” in Japan, featured by :

Compulsory scheme for Farmers operate the

farmers scheme
* It changed to the voluntary scheme in 2018.

 Ensured the scale of the  Farmers’ groups (mutual

scheme, aid associations) and the
government manage and
 Avoided the adverse
operate the scheme,
selection,
 NO insurance companies
 Facilitated farmers’
involved,
participation for the
scheme operation.  Reduce the operational
costs of the scheme.
7
Overview

Item Description
Objective Pursuant to the Agricultural Disaster Indemnity Act (enacted in 1947),
the system based on contributions made by the government and
farmers (insured) shall compensate for any losses such as a yield
decrease incurred on farmers due to natural disasters, disease and
pest damage, and bird and animal damage, in order to stabilize farm
management by such farmers.

Insured Items 1. Rice, wheat, and barley

2. Livestock
3. Field crop/ upland crop
4. Fruit and fruit-trees

Eligibility A member of an agricultural mutual aid association

Premium 50% of the premium is subsidized by the government.

Subsidy (Premium rates: approximately 0.20 – 0.70% for paddy)
Risk Coverage 1. Natural disasters such as storm, flood, drought, cold weather,
earthquake and volcanic eruption,
2. Fire damage,
3. Disease and pest damage, and
4. Bird and animal damage.
8
Implementation Structure

An agricultural mutual aid association plays a role

of the implementing entity for the scheme

The government
The government provides
(special account for stable food supply)
reinsurance to prepare for major
disasters in case if an agricultural
Reinsurance Reinsurance
mutual aid association needs a large
premiums payouts
payout.

Agricultural Mutual Aid

Associations
The agricultural mutual aid
associations collect premiums and
Premiums Payouts distribute payouts. They also
conduct loss assessment survey.

Member farmers

9
Underwriting Performance (1)

More than 80% of paddy field is insured; while

the insurance penetration rate for fruits is low
with around 20%

No. of Insured Insured Area Insured Penetration (based on area)

Item
Farmers (2022) (2022) 2020 2021 2022
Paddy 824,000 974,991 ha 83% 83% 83%

Mugi (grain) 26,000 205,290 ha 96% 97% 96%

Fruits 36,000 20,000 ha 21% 22% 23%

Upland Crop 50,000 229,000 ha 59% 64% 67%

Greenhouse 153,000 611,000 units 60% 66% 70%

* Note: The figures include both agricultural mutual aide scheme and revenue insurance scheme.
Source: Ministry of Agriculture, Forestry and Fisheries, Japan
10
Underwriting Performance (2)

The average loss ratio of the agricultural mutual

aid scheme was around 95%: Gross premiums and
paid claims were almost balanced
(USD million)
800 120%
110%
700 104% 102% 100%
96% 96%
600 90%
84% 80%
500 76%

400 60%

300
40%
200
20%
100

0 0%
2016 2017 2018 2019 2020 2021 2022 2023
Total Premiums Paid Claims Loss Ratio

Source: Ministry of Agriculture, Forestry and Fisheries, Japan 11

National Budget for Agricultural Mutual Aid Scheme

The total budget of the agricultural mutual aid

scheme accounts for 3.7% of the total budget of
the Ministry of Agriculture million yen
(million USD)

Item 2018 2019 2020 2021 2022 2023

MAFF total 2,302,100 2,310,800 2,310,900 2,285,300 2,277,700 2,268,300
budget (15,194) (15,251) (15,252) (15,083) (15,033) (14,971)

Total budget for 86,950 85,322 84,208 83,888 82,272 80,113

Agricultural (583) (572) (564) (562) (551) (537)
Mutual Aid
% of the total budget 3.8% 3.7% 3.6% 3.7% 3.6% 3.5%

Premium 50,110 50,110 50,110 50,110 48,773 46,888

subsidies (336) (336) (336) (336) (327) (314)

Administrative 36,404 34,777 33,680 33,360 33,080 32,806

costs for (244) (233) (226) (224) (222) (220)
agricultural
mutual aid
associations
Source: Ministry of Agriculture, Forestry and Fisheries (MAFF), Japan 12
Revenue Insurance Scheme
 Revenue Insurance Scheme in Japan

Revenue insurance is to protect farmers

comprehensively responding to an unexpected
decrease of agricultural income

The agricultural output has been Farmers who practice multiple

diversified. farming had limited safety net.

Others, Rice,
10,394, 14,343,
(12%) (17%)
Poultry,
8,530,
(10%)
Gross Agricultural Multiple
Hogs, Single 238,000 certified farming,
Output
6,331, farming, farmers 112,048,
56 billion USD
(8%) 126,301, (2015) (47%)
(2014) Vegetables
, 22,421, (53%)
Dairy (27%)
cattle, Beef
8,051, cattle, Fruits,
(10%) 5,940, 7,628,
(7%) (9%)
Unit: 100 million yen
Source: Ministry of Agriculture, Forestry and Fisheries, Japan Source: Ministry of Agriculture, Forestry and Fisheries, Japan
14
Overview
Item Description
Objective • Revenue insurance cover the entire agricultural income of each
farmer, not just the income loss due to natural disasters, but also
price decreases, etc., without specifying crops.
• It gives a compensation for up to 90% if the income level is below
the 90% of the standard income level.
Insured • Sales of agricultural products produced by the farmers
Revenues themselves, including simple processed agricultural products.
• Subsidies are not included in sales income.
Eligibility A blue return taxpayer (individuals or corporates)
* Blue return system: It is necessary to record the status of daily
transactions related to the income and expenses for the correct
declaration of the income amount. Those who maintain a certain
standard of bookkeeping can receive advantageous treatment.

Premium 50% of the premium is subsidized by the government.

Subsidy
Risk Coverage Any risks related to decrease of the agricultural income are
covered, such as natural disasters, pests, diseases, injuries,
accidents, price decrease, fluctuations of foreign exchange rate, and
so forth.
15
Implementation Structure

An agricultural mutual aid association plays a role

of an intermediary for the insurance sales

The government
(special account for stable food supply) The government provides
reinsurance to make sure for
Reinsurance Reinsurance delivering the insurance payouts to
premiums payouts the farmers.

National/ Agricultural Mutual Aid The agricultural mutual aid

Associations associations collect premiums and
distribute payouts. They check the
submitted documents from the
Premiums Payouts farmers.

Farmers submit necessary

Farmers/ Agricultural cooperation
documents themselves for insurance
who applied blue return tax system
claims.

16
Insurance Premiums

Category Premium Rate

(after subsidizing)
10 2.574%
9 1.578%  Premium rates will be decided by risk tier,
8 1.522% with premium rates decreasing in steps
7 1.467% for those who receive few payouts, and
6 1.412%
increasing for those who receive many
5 1.356%
4 1.301%
payouts.
3 1.246%  There are 21 premium rate categories in
2 1.190%
total.
1 1.135%
0 1.080%  In the 1st year, a premium rate of the
-1 1.024% category “0” is applied.
-2 0.969%
-3 0.913%  In the 2nd and subsequent years, the
-4 0.858% category will be decided based on the
-5 0.803% loss ratio of the farmers (insurance
-6 0.747%
payouts divided by paid premiums) .
-7 0.692%
-8 0.637%  If no insurance payouts, the category will
-9 0.581% be lowered by one level.
-10 0.540%

Source: Ministry of Agriculture,

Forestry and Fisheries, Japan 17
Underwriting Performance

38% of the agricultural management entities

applied the blue return tax, and 25% of them
joined the revenue insurance
% of Insured Agricultural
No. of Agricultural Entities Entities out of the Total
Applied the Bule Return Entities with the Blue
100,000 Number of Insured Agricultural
Tax System Return Tax
Management Entities
1,000,000 100%

80,000
800,000 80%
No Blue
60,000 Return No
600,000 Tax 60% (75%)
(586,400,
62%)
40,000
400,000 40%
With Blue
20,000 Return
200,000 Tax 20%
Yes
(353,000, (25%)
38%)
0 0 0%
2019 2020 2021 2022 2023 Total No. of Insured Agricultural
Agricultural Management Entities
Source: Ministry of Agriculture, Forestry and Fisheries, Japan Management Entities
18
Other Features

 Payouts of revenue insurance shall be given after the

completion of the tax procedure. Thus, farmers can
receive the interest-free bridge loan to manage
their cash flow after they decrease their agricultural
income.

 Farmers have to choose either agricultural

mutual aid scheme or revenue insurance. They
cannot join both insurance schemes at the same time.

 The government mainly promotes revenue

insurance scheme because of low administrative
costs.

19
Case Studies: India
Agricultural Insurance Scheme in India
Crop Insurance Pilot
1972 - 1978
 Individual Approach, 3110
farmers insured
 General Insurance
Corporation (GIC) of India
introduced insurance for
wheat and potato etc.,
 Premium INR 0.45 million
 Claim amount: INR 3.8
million (loss ratio: 840%)
National Agricultural
Insurance Scheme (NAIS)
1999 – 2013
 Introduced index-based
insurance: 208.5 million
farmers covered,
 Premium INR 86.7 billion,
Loss ratio ~ 290%
 Premium rates: 1.5% to 3.5%
depending on crop and
season
Pilot Crop Insurance Scheme
1979 - 1985
 The insurance cover is
against decline in crop yield
below the threshold level
 GIC provided insurance for
cereals, millets, oilseeds,
cotton, potato, etc.
 0.67 million farmers insured
 Premium INR 19.7 million |
Loss ratio ~77%
Modified NAIS
2010 - 2016
 Private insurance companies
allowed into crop insurance
 Actuarial premium introduced
 Sampling survey conducted
at village level to reduce
basis risk
Comprehensive Crop
Insurance Scheme
1985 - 1999
 The first nation-wide crop
insurance scheme: 76.3
million farmers covered
 Premium INR 4035.6 million,
loss ratio ~ 571%
 Premium 2% for cereals &
millets, 1% for pulses and
oilseeds
 Compulsory scheme for
loanee farmers.
Pradhan Mantri Fasal Bima
Yojna (PMFBY)
2016 - Present
 Area Yield Index Insurance
(AYII) was introduced
 Launched recently in 2016
and on-going scheme
 NAIS and Modified NAIS
were replaced by PMFBY
21
Key Takeaways: Agricultural Insurance in India

The agricultural insurance was compulsory for loanee

Bundling
with
farmers
credit Farmers had to join the agricultural insurance when they borrow
money from financial institutions. Yet, it has changed to voluntary
scheme for all the farmers since 2020.

Operation A mobile application has been introduced to report crop

loss and sampling survey results

Using the mobile application facilitates the claim process and

improve transparency of the sampling survey process.

PPP Insurance companies are selected by the tendering in each

Scheme region
Companies who offer the lowest premium rates in a specific area
will be selected as insurers for 3 years. The agricultural insurance
market is open to private insurance companies.
22
Overview of PMFBY

Item Description
Sum Insured • Based on the production cost, proportionally paid according to the
yield below the benchmark yield.
Premium Rate Maximum farmers’ share of premiums:
 Field Crops – 1.5% - 2% of sum Insured
 Commercial Crops – 5% of sum Insured
Rest of the actuarial premium was subsidized by the government and
shared equally by state and central governments.
Indemnity Level • 3 levels: 70%, 80% and 90%
• Threshold yield is calculated based on the average yield of best 5
years out of last 7 years.
Risk Coverage • All widespread calamities such as flood, drought, landslide, cyclone
etc.
Insurers • Insurers are selected by the tender. The lowest premium rates shall
be based on the insured area of target crops.
• Allocation of business areas to insurance companies for 3 years

Enrolment • Agricultural insurance was compulsory for loanee farmers until

2020.

Coverage Crops • Food crops (cereals, millets and pulses)

• Oilseeds
• Horticulture crops, etc. 23
Implementation Structure

Department of Department of Statistics

Agriculture and
Co-operation • Yield data sharing

District
Insurance Companies
(selection through bidding for each area)
Insured unit
(village)
• Acknowledgement of
• Notification of entry farmers’ enrolment
• Payout calculation Enrolment and payment
• Assigning random number
data sharing
for sampling survey

Premium
payments
Banks
Farmers (regional banks, cooperative banks,
Distribution of commercial banks)
payouts

24
Underwriting Performance

The average loss ratio between 2016 and 2020 was

86%: it was stable at around 80-90%

(USD million)

5,000 120%

97% 100%
4,000
90%
78% 81% 80%
3,000
60%
2,000
40%

1,000
20%

0 0%
2016-17 2017-18 2018-19 2019-20
Gross Premium Paid Claims Loss Ratio
25
Other Features

 Crop insurance App successfully facilitates easier

reporting of crop loss within 72 hours of occurrence
on any events.

 Many farmers are dissatisfied with both the

amount of compensation and the amount of time
it takes to settle their claims.

 As the PMFBY scheme currently does not

distinguish between large and small farmers, the
issue of identification arises. Vulnerable small farmers
are the ones to be targeted under the program.

26
 Contact Information

International Department Main Office:

1-13-17, Kita-Otsuka, Toshima-ku, Tokyo 170-0004, Japan
Tel: +81-3-5394-8992
Fax: +81-3-5394-8990
Email: M-OVS-EIGYO@sanyu-con.co.jp
HP: http://sanyu.tcp.jp/english/index.html

Contact Persons and Contact Details:

Mr. Kota HIRAYAMA: kota-hirayama@sanyu-con.co.jp
Mr. Yutaro TAKAMURA: yuu-takamura@sanyu-con.co.jp
Thank you