Double the protection for paddy farmers: A dual-track system combining insurance and cash relief

Currently, paddy fields damaged by natural disaster are eligible for cash relief payment under the Directions for Agricultural Natural Disaster Reliefs. Based on 20 percent of the production cost, the payment amount has been set at NTD 18,000/hectare. Agriculture and Food Agency (AFA) says an insurance program can provide paddy farmers with additional support against natural disasters, as their damage to production course is often too great for just the cash relief to cope with. With extreme weather events increasing in both frequency and severity, the potential huge loss necessitates the implementation of the dual-track system, to give farmers an extra layer of protection.

Government support converts the small payment by farmers into a well-rounded coverage

The AFA indicates that the pilot program for 2nd crop of 2017 will guarantee farmers 80 percent of the historical average income. That number is drawn not only taking into account the chances of disasters occurring, premium rates, and cost burdens on farmers but also to act an adequate supplement to the present 20 percent cash relief. If the guaranteed amount is higher, the insurance payment will more likely to be triggered, which inevitably stacks up the premium. Thus, in conjunction with the current cash relief program and to balance coverage adequacy and payout chances, in the 2nd crop of 2017, farmers are only required to pay 10 percent of the premium, and the central government pays another 50 percent. With that alone, the insurance policy already offers 60 percent of the total protection, and if the local governments are willing to chip in more, the income of farmers can be more secured.

Minimize the disaster loss with the insurance

The AFA explains that the guaranteed payout rate for this year’s 2nd crop (2017) is based on 80 percent of the average per hectare harvest in the previous five years of that administrative township. Using five-year data can better reflect the production status than the three-year used in similar practices, as this method can even out the production fluctuations from year to year and take into account the differences among townships. When we review the production status of the same harvest period in each township, in the recent five years, the harvest of 108 townships has at least once fallen below the specified 80 percent of the average harvest (in which a payment would be issued to meet the guaranteed amount).

As an example, Baozhong Township of Yunlin County, from 2012 to 2016, the 2nd crop harvests per hectare in the township were 6,707, 6,017, 5,778, 4,895, and 4,005 kilograms, respectively. With the average being 5,489 kilograms, the guaranteed amount of 80 percent is calculated to be 4,384 kilograms. If the 2nd crop of this year obtains the same harvest as the 2nd crop of 2016, with a 10 percent insurance premium of NTD 412/hectare paid, the farmer may receive 60 percent of the total payment, NTD 5,230. If Yunlin government contributes another 40 percent of the premium, the insurance payment can then reach the maximum amount of NTD 8,717. Of course, the farmers are also eligible to claim the original natural disaster cash relief, NTD 18,000/hectare. With all these measures, the loss of farmers can be greatly reduced.

Small payment for great easement: Have it before you need it

The AFA stresses that, in the pilot run period, the government will continue the agricultural cash relief program on natural disasters in its current form and also will also contribute half of the insurance premium. This way farmers only have to chip in very little to insure themselves against the loss from natural disasters. This pilot program starts from the 2nd crop of 2017, and over 500 farmers have already taken part, with over 500 hectares of farmland insured. With the deadline of application on July 31st, the AFA recommends farmers to consider their farming situation when taking part. As a pilot program, it will be continually reviewed and modified accordingly.

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