WB pushes new agri insurance products
The Philippines needs to come up with new and better agricultural insurance products to help farmers cope with natural disasters, according to the World Bank.
World Bank financial sector specialists Tatiana Skalon, John Luke Plevin and Radu Tatucu pushed the recommended reforms in agricultural insurance in the multilateral lender’s blog.
“Better products will protect farmers and help them recover after climate disasters,” the specialists said.
The Philippines experiences an average of 20 typhoons per year, with eight to nine of these making landfall.
When disasters hit the country, the experts said the agriculture sector suffers the most significant losses.
While farmers would need finance to get back on their feet following disasters, the specialists said less than three out of 10 farmers in the country have access to savings accounts or formal credit.
Those without access to formal credit are then forced to borrow from loan sharks at very high interest rates, often having to give up their entire harvest to be able to pay up, perpetuating a cycle of poverty.
In terms of insurance payments, the World Bank specialists said these are insufficient and do not cover the cost of new seeds and fertilizers.
“Existing insurance products are not suitable for most farmers as they are expensive to administer and do not reflect losses suffered by farmers. New products are needed for the vulnerable smallholder farmers in the Philippines,” they said.
In coming up with new insurance products, the authors said the government should work with the Philippine Crop Insurance Corp. (PCIC) to consider specific needs of different types of farmers, ranging from smallholders to commercial farming enterprises.
“Adoption of technology will be critical, for example using satellite data to assess losses or determine insurance payouts cheaply, transparently and quickly,” they added.
As PCIC faces critical operational challenges and lacks tools to effectively manage its risks, they said implementing reforms and mobilizing the private sector would help improve the effectiveness and efficiency of the provision of agricultural insurance to farmers.
Aside from bringing its expertise, innovations and efficiency, the World Bank specialists said the private sector could collaborate with the PCIC.
In addition, the World Bank specialists said having adequate regulations would be needed in agricultural insurance. This would entail establishing a new legal framework and targeting of subsidies to ensure support is provided to those most in need.
“With these improvements, agricultural insurance can serve as an essential tool for Filipino farmers to effectively manage climate shocks. It can safeguard their livelihoods, protect them from falling into poverty traps, enhance their productivity and innovation, and contribute to the overall enhancement of food security in the Philippines,” they said.