Unlocking resilience: The future of agriculture insurance in PH

By Michael F. Rellosa

Imagine being a farmer in the Philippines, your livelihood tied directly to the land, your family’s future dependent on the whims of nature. For generations, Filipino farmers have faced this stark reality, but today, the stakes are higher than ever. Our nation, battered by an average of 20 typhoons annually and increasingly vulnerable to droughts and other climate shocks, sees its agricultural heartland constantly under threat. Despite agriculture employing a quarter of our workforce, a staggering two-thirds of our 10.9 million farmers remain unprotected by crop insurance, leaving them financially devastated with each passing storm or dry spell. This vulnerability isn’t just a farmer’s burden; it’s a national crisis, pushing us to rely heavily on imported rice and raising urgent questions about our food security.

Agriculture insurance isn’t merely a financial product; it’s a lifeline. It’s the promise that when disaster strikes, farmers can recover their investments, rebuild and even dare to innovate, adopting new technologies to boost productivity. It’s about stabilizing incomes, ensuring food on our tables and building a more resilient Philippines.

For decades, the Philippine Crop Insurance Corp. (PCIC), a government-owned entity, has been the primary insurer for our farmers. PCIC’s mission is clear: to shield farmers from losses caused by natural calamities, diseases and pests affecting their crops, livestock and farm assets. In 2023, PCIC reached 3.909 million farmers and fisherfolk, insuring P127.766 billion worth of agricultural assets and collecting P6.297 billion in premiums. While PCIC has shown financial strength, its traditional, often paper-based operations can be slow, and it still grapples with effectively managing the immense risks posed by widespread disasters.

Recognizing these challenges, PCIC is embracing innovation. They’re pioneering a parametric insurance program for rice farmers, a game changer that uses satellite data and remote sensing to trigger rapid payouts within three to five days of a typhoon, bypassing lengthy field inspections. This isn’t replacing the old system but complementing it, aiming for faster, more objective relief. Similar efforts are under way with Weather Index-Based Insurance and Area-Based Yield Index Insurance, promising quicker compensation based on objective weather or yield data.

The call for private hands

Experts from the World Bank and Asian Development Bank (ADB) agree: For agriculture insurance to truly flourish, we need more players on the field. Bringing in private insurers isn’t just about adding numbers; it’s about injecting vitality and choice into the market.

More choices, better fit: Private companies can offer a wider array of specialized products, tailored to the unique needs of different crops, regions and farmers, moving beyond a one-size-fits-all approach.

Efficiency and reach: Private insurers bring modern underwriting, streamlined claims processes and extensive networks, including rural banks and cooperatives, to reach farmers in remote areas that PCIC might not fully cover.

Innovation and healthy competition: More players mean more competition, which naturally leads to better services, fairer pricing and continuous innovation, ultimately benefiting the farmers.

Shared burden, greater capacity: The sheer scale of climate risk in the Philippines is immense. Private capital, backed by global reinsurance, can help spread this burden, ensuring that no single entity, or farmer, has to face catastrophic losses alone.

The biggest hurdle for private insurers has been PCIC’s exclusive access to government premium subsidies, creating an uneven playing field. The World Bank has been vocal, urging the government to open these subsidies to private players to foster genuine competition.

Yet, there’s a beacon of hope in emerging public-private partnerships. The collaboration between PCIC and CARD Pioneer Microinsurance Inc., supported by ADB, is a prime example. This pilot program, where risks are shared (PCIC 70: CARD Pioneer 30) for high-value crops, allows private insurers to gain invaluable experience and build capacity within a supportive framework.

Legislative action is also gaining momentum. House Bill 14, for instance, aims to expand PCIC’s coverage to all agricultural commodities and, critically, empower PCIC to offer reinsurance services to private insurers, fostering a more competitive and innovative market. This legislative push aligns directly with international recommendations for a more liberalized and robust agricultural insurance sector.

For agriculture insurance to truly take off, we need a concerted effort. This means accelerating policy reforms to open up subsidies, investing in robust data infrastructure and technology for accurate risk assessment and launching nationwide campaigns to educate farmers about the benefits of insurance. By fostering strong public-private partnerships and integrating insurance into agricultural credit programs, we can build a future where every Filipino farmer is resilient, empowered to invest, and our nation’s food supply is secure against the escalating threats of climate change. It’s a future where the hard work of our farmers is truly protected, ensuring prosperity for all.

Source: manilatimes.net