HANOI, Vietnam – Stakeholders in Vietnam agree, agricultural insurance has proven to be an effective solution to support farmers in managing risk and dealing with the consequences of climate change. However, more needs to be done to improve insurance products as well as the operational procedures in the sales and claims process. A major challenge for expanding agriculture insurance is to increase the awareness of farmers about its potential benefits. This is key to increase their willingness to pay for insurance products and reduce the dependency on subsidies.
These were conclusions during a workshop organized on 2nd of March 2017 in Hanoi by the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), a think-tank for agriculture and rural reform in Vietnam. The workshop served to present and discuss the results of a study on the lessons learned from the national agriculture insurance pilot program (NAIPP) in Vietnam. The study was supported by the ASEAN Climate Resilience Network, where policy makers from ASEAN Member States identified agricultural insurance as a practice of high priority for helping farmers in Southeast Asia to deal with the consequences of climate change.
“The NAIPP was a big step ahead in laying the groundwork for making effective and efficient agriculture insurance available to Vietnam’s farmers. In the three years of the NAIPP, despite the many challenges the program faced, a lot has been learned. These lessons are very valuable for the development of a coherent strategy for agricultural insurance in Vietnam. IPSARD is proud and contented to be part of this process” said Dr. Tran Cong Thang, Deputy Director General of IPSARD. In a next step, IPSARD will translate the report into a policy brief to reach out to policy makers to ensure that the lessons learned from the study are used to inform a government decree on agricultural insurance which is currently being drafted.
Dr. Nguyen Hong Ninh from the Swiss Agency for Development and Cooperation pointed out the importance of using new technologies for the expansion of agricultural insurance: “High transaction cost in the sales and loss assessment process can be overcome by new technologies like remote sensing. Such technologies should be promoted stronger in the next phase of agriculture insurance in Vietnam”.
Participants agreed that insurance is only one of many tools and practices to help farmers dealing with the consequences of climate change. Insurance products must be carefully designed to avoid that farmers apply practices that are not sustainable in the long-term. This and moral hazard are a risk in agriculture insurance when farmers are not optimizing their farm management because they know they will be compensated if things go wrong.
By: Jonas Dallinger