October 2, 2024

 

Insurance to have growing role in Vietnam's agriculture sector, according to insurance association official

 

 

Agricultural insurance will gradually play an important role in Vietnam in which more than 60% of the population live in rural areas and are largely dependent on agricultural production, according to Ngo Trung Dung, Insurance Association of Vietnam's (IAV) deputy secretary-general.

 

In an interview, Ngo said that the reasons for this prediction pertains to the domestic agriculture sector which has been hit by natural disasters, epidemics and climate change. Thus, having a protection insurance product will help reduce the financial burden of farmers who may suffer from the impact of unforeseen risks, thereby protecting their income and stabilising their economic life.

 

When farmers see that their assets are protected against risks by insurance, they will be more confident in developing farming and increasing production.

 

When agricultural insurance is strengthened and developed, it will also contribute to the overall development of the Vietnamese insurance market. Many insurance companies will participate in providing agricultural insurance products; constant expansion and diversification of products will create a healthy competitive environment between insurance companies. Additionally, there will be a rise in the launch of products that are suitable to the needs of farmers, thus offering more choices to farmers and agricultural enterprises.

 

However, insurers are hesitant about offering agricultural insurance even though Vietnam has a subsidy scheme for agricultural insurance premiums. The subsidies range from 20% to 100% of the premiums, depending on the economic status of participants.

 

The compensation rate in agricultural insurance in Vietnam is often quite high, and can be up to 70-90% for severe damage, especially in fields such as rice, aquaculture (shrimp, etc) and livestock. At times, the loss rate is over 100% or even over 200%. Insurance companies face difficulties in placing business with reinsurers due to huge risks.

 

On the demand side, many Vietnamese farmers have low incomes, so it is difficult for them to afford insurance premiums, especially when there is no full support from the state. Appraisal work and the lack of accurate data to assess the extent of damage led to delays in compensation payouts.

 

To boost the penetration of agricultural insurance, Ngo said "There needs to be promotion campaigns to raise farmers' awareness of agricultural insurance. In addition, there needs to be appropriate financial support solutions from the state."

 

Many insurance companies have strengthened their capital position and created reserve funds to respond to natural disasters and set aside reserves for unusually large claims caused by disasters, Ngo said.

 

The Vietnamese insurance industry has also strengthened cooperation with international and regional organisations to share experiences and receive financial and technical support to respond to natural disaster risks.

- Asia Insurance Review