Agricultural Insurance in Bangladesh; And

Comparative Analysis of Various Countries

This Paper is prepared by:

Asif Ahmed
BBA 13th Batch
Dept. of Accounting & Information Systems
Faculty of Business Studies
University of Dhaka, Bangladesh
E-mail; [email protected]
Cell phone; +8801922939126

TABLE OF CONTENT
Abstracts 2

Chapter 1 Introduction 3

Chapter 2 Analysis of Crop & Livestock Insurance in Bangladesh 5

Chapter 3 Comparative Analysis of Crop & Livestock Insurance

in Various Developed and Developing Countries 13

Conclusion & Recommendations 24

References 25

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

ABSTRACTS
Agricultural insurance, mainly the crop insurance and livestock insurance, is
looking to be reintroducing in Bangladesh. First it was introduced in 1977 by
Sadharan Bima Corporation (SBC), but it was closed down because of
inadequate planning and lack of government intervention.

As the part of the paper my main focus is to give potentials and problems in
implementation of crop insurance and livestock insurance in Bangladesh. And give a
comparative analysis of agricultural insurance of various countries. In this
report we discussed these in the following chapter:

Chapter 1: in chapter 1 I discussed our scope of study and objective of study

and problems faced to prepare the report.

Chapter 2: in chapter 2 I tried to give a general introduction and background

about the crop and livestock insurance in the country. Find out the reason of
early collapse of agricultural insurance that was started in 1977. Also try to
find out the potentials, befits and problems of implementation of such
insurance in the country. And make a suggestion for implementation.

Chapter 3: in chapter 3 I tried to give a comparative analysis of agricultural

insurance, mainly crop insurance and livestock insurance, of India, China,
USA, Australia, UK, Spain, Italy, Greece, Canada and Irelands. And also tried
to give a finding on that.

In the conclusion part I give my opinion based on the overall discussion and
the letter I give the name of the articles, report, and journals I take help to
complete the report.

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

CHAPTER 1
INTRODUUCTION

Introduction:
Bangladesh is a gift of nature with several advantages. It is the country with is so near
the blessing of nature. It is country with more than 160 million populations. 65% -
75% of them are directly and indirectly involve with the agriculture. Around 230
major rivers are surrounded the country with Bay of Bengal in the north. Almost 80%
of the lands of the country are within 1 meter of the sea level; as a result it has been
affected by various natural disasters year to year.

Every year Bangladesh is affected by natural disasters, such as – cyclone, storms,

floods, droughts etc. These natural disasters cause serious harm to the crops and
livestock of the framer and lead them serious financial crises. In this regard crop
insurance and livestock insurance can be the most appropriate things which can save
the farmer from the serious financial crises cause by natural disasters every year.

Objectives of Study:
Business is spreading day by day. Now business is not about to earn profit but also to
serve the society and the people in various sectors. That’s why corporate governance
is so important issue in these days. As the student of Business Administration we
should think about the new business opportunities not only to earn the money or profit
but also to serve the nation.

In our country till now no insurance company offer any agricultural insurance policy,
like – crop insurance or livestock insurance. But our economy is mostly depend on the
agricultural. So we should think about to start a insurance for agriculture in our
country.
The main objective to prepare this report is to –
1. Know the importance of implementing various agricultural insurance policies
specially crop insurance and livestock insurance.
2. Find out the potentiality and problems of implement such insurances in the
country.

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

3. Make a cooperative analysis of implement agricultural insurance policies in

various developing and developed countries.

Scope of Study:
This report gives me a vast opportunity to know about a significant issue of insurance
in our country perspective. However this report holds study about –
1. Historical background of crop insurance and livestock insurance in
Bangladesh
2. Government activities to promote these types of insurances.
3. Problems and Potentials of implementing such insurances in Bangladesh.
4. Some comparative analysis of agricultural insurance in various developed and
developing countries.

Report Methodology:
The report is mainly a descriptive research outcome. The information of the report is
mainly collected from the secondary data sources. In order to prepare the assigned
report we have collected necessary information from two types of source as follows:
1. Primary information is collected from various articles and journals mainly
from internet.
2. Information from official website of Agricultural Ministry of Various
countries.

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

CHAPTER 2
ANALYSIS OF CROP & LIVESTOCK INSURANCE IN BANGLADESH

Basic Concepts on Agricultural Insurance:

Before analyzing the situation of crop insurance and livestock insurance in
Bangladesh, we first know the basic concepts of these two things –

Crop Insurance is the insurance process to give the farmer or the owner of the crops
assurance about the crops, price of the crops and income of the person from those
crops. In simply speaking crops insurance is the insurance policy that gives the owner
of the crops about the risks associated with the crops. If the framers do not get a
standard amount of product, required price and income from the farms; they are
compensated by the insurance company under crops insurance policy.

Livestock insurance is other types of agricultural insurance which insured milch

cows and buffaloes, claves / heifers, stud bulls, bullocks and castrated male buffaloes
whether indigenous or exotic or cross bred. This policy provides indemnity in event of
death of insured cattle due to accident inclusive of fire, lightning, flood, cyclone,
famine, surgical operation, strike, riot, civil commotion, diseases. (Mishra & Mishra,
insurance, Sixteenth Edition)

Background of Crop and Livestock Insurance in Bangladesh:

Bangladesh is one of the few developing countries who enter into the world of
agricultural insurance. In Bangladesh Crop Insurance and Livestock Insurance first
introduces by Sadharan Bima Corporation (SBC) in 1977 under a pilot project. A
separate crops and cattle insurance department was established by SBC in their Head
Office of Dhaka. This department provide crops and cattle insurance policy for two
types of farmers –
1. Farmers of various cooperative society registered under Bangladesh Rural
Development Board (BRDB); and
2. Farmers who are taking loan from Bangladesh Krishi Bank (BKB).

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Insurance premium was determined on the basis of information on area of crop,

expected production, expected price, and rate of premium. The assessment of loss is
made by the opinions of the representatives of the Insurer, the insured, loan giving
agency and the agriculture department after an ocular view of the affected crop land.
The difference between the actual and the expected yield form the basis of the claim.
The scheme was first started in 2 (two) selected Thanas of 2 (two) districts, and later
expanded up to 56 Thanas in 1981. After a continuous operation of around 19 yrs. the
scheme came to a temporary stop in 1996 registering an adverse loss experience of
about 500% on average. Most of the framer, that time, took this insurance were
members of various cooperative societies (source: Dr. Mizan & Dr. Sirajul, NSU, C.I.
as Risk Management)

There were several causes of failure of this project, these are as follows (Source: Dr.
Mizan & Dr. Sirajul, NSU, C.I. as Risk Management) –
1. There were no adequate policy, plan or strategy for this project, and the most
of the officials of the SBC officials engaged with that project had no
knowledge about the crop insurance and cattle insurance.
2. Bangladesh Bank had not taken any supportive activities for that project.
3. The program was controlled from the SBC head office; it has no grass root
controlling process to monitor the total activities.
4. There is no scientific process to measure the insurance premium and insurable
amount.

We can try Fishbone Diagram, widely known as Ishikawa Diagram or Cause and
Effect diagram, to find out the causes of close down of crops insurance that was
started in the 1977. The Diagram is given as follows –

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

Fig; Fishbone Analysis of Failure of Crops Insurance

If we see the diagram there were a number of big causes of close down of the
insurance program. Actually the main problem is that there is no specific strategic
plan and roadmap for the project. It was a unplanned individual effort. At present
some of the organizations are want to introduce crops insurance privately. Bangladesh
Rural Advancement Committee (BRAC), jointly with Green Delta Insurance
Company (GDIC), has already declared to introduce their crops insurance project for
the rural farmer.

Government Activates about Crops and Livestock Insurance:

Government of Bangladesh recently tried to re-introduce crops insurance as part of
the project titled ‘Multi-dimensional and integrated plan for creating job opportunity
for the poor and vulnerable’ for helping vulnerable population of the country. It is

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 Agricultural Insurance in Bangladesh; And Comparative Analysis of Various Countries

mainly an employment project to reduce the number of unemployed people of the

country. According to me, the government wants to fulfill the both unemployment
reduction goal and agricultural insurance goal at a time. Around 1.3 million people of
12 district of grater Rangpur, Dinajpur, and Faridpur are expected to benefit by this
project.

Potentials of Crops and Livestock Insurance in Bangladesh:

As mentioned earlier in the first chapter, the economy of Bangladesh is mainly based
on agriculture. About 62% of the people are engaged with agriculture, mainly with the
crops productions (Source: Bangladesh Statistics Bureau 2007), although the country
is slowly moving towards industrialization.

The total area of Bangladesh is about 147,570 square kilometer and consists mostly of
low, flat land. About 80% of the land is flood plain and only in the extreme northwest
do elevations exceeds 30 meters above mean of sea level, making the majority of
Bangladeshi land flooding at least a part of the year. Between 30 -70 percent of the
country is flooding each year. Floods have a detrimental impact on crops yields; in
two severe floods, 1974 and 1987, the shortfalls in crops productions were about 0.8
and 1.0 mt respectively. On average during the period 1962-1988, Bangladesh lost
about 0.5 million tons of rice annually as a result of floods, which account for nearly
30% of the country’s average annual food grain imports. (Source: Saleemul Huq &
Jessica Ayers, IIED, London)

In the flood of 2007, agriculture Bangladesh has lost 1.2 million acres of crops. The
FAO mission estimated that because of Cyclone Sidr in 2007 almost 70 percent of the
Boro season crops have destroyed. A large number of fisher folk lost their fishing
gear and houses. In five most affected districts some 18 percent of the poultry, 11
percent of goats and sheep, 7 percent of ducks and some 3 percent of cattle and
buffalos have been lost. Aila 2009 had damaged around 96,617 hector of cultivable
lands; the loss in production is of around 482,144 metric ton that is the worth of BDT
6,776 million (around 99 million USD).

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Drought, a limited phenomenon affecting the northwestern part of the country, also
causing loss agricultural products, specially the crops. Loss of crop yield is the major
impact of drought, and affects the economy of Bangladesh badly. Resources worth an
estimated US$25 billion have been destroyed by natural calamities in Bangladesh
from 1947 to 1991. (Source: Saleemul Huq & Jessica Ayers, IIED, London)

The following table has show the impact of drought of some selected years –

Year Damage
1978 0.7 million tons of Aman rice due
to rain deficit in August and
September.
1979 0.6 million tons of Aus rice, 0.3
million tons of Aman rice and 0.4
million tons of Boro rice.
1981 0.12 million tons of Aus and 1.3
million tons of Aman rice.
1982 0.4 million tons of Aman rice due
to rain deficit in October

Because of the above mentioned natural disasters, every year the farmer falling in
financial crisis. In our country most of the farmers are live extremely below the
poverty line. As a result of such kind of natural disasters in every year they lose their
home, crops and money, which make them unable to restart their cultivation after the
calamities. (Source: M A Hamid, 1991)

Based on the above discussion we can say that crop insurance and livestock insurance
have great potentiality to expand in Bangladesh. Every year the framer of our country
lose their crops, cattle and fishes because of natural disasters. So if they have the
opportunities to purchase that type of insurance policy they will be interested to
purchase it because though they cannot regain their crop or cattle or livestock by these
policies but they can regain their financial capacity to start production quickly. So
crop insurance and livestock stock insurance have great requirement in our country to
support poor framer.

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Benefits of Crops and Livestock Insurance in Bangladesh:

Now the question is, if we can successfully introduce the crops insurance and
livestock insurance in the country, it will give us how much benefit, especially to our
farmers and the national economy as a whole? The benefits can be as follows –
1. In our country most of the farmers are live below the poverty line. So when
the framers lost their crops and livestock due to various natural calamities, it
becomes difficult for them to live and restart their production activities. These
types of insurance will give the financial support to our farmer, when the
disasters damage their crops and cattle.
2. Poor framers get regain their financial positions quickly, as they can get
financial conditions regain quickly they will also come back to production
quickly.
3. Every year we lost huge amount of crops and livestock due to various natural
disasters and diseases, as a result price of the various agricultural products
goes up. So this type of price fluctuation can be reduced some degree by this
insurance, as farmer get quickly get rid of the financial crisis.
4. Every natural disasters cause huge loss of agricultural and other types of
properties. Then it is become difficult for the government to compensate both
side and it makes a hazardous situation. If the agricultural side is compensated
by insurance, government can take care of other sides which reduce the
hazardous situation.
5. Increase the financial health of the country as well as the framers.
6. To maintain these types of insurances we will require some competent
workforces which will create some employment opportunity.

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Problems of Implementing Crop Insurance and Livestock Insurance

in Bangladesh:
Though there are lots of potentials for implanting crop insurance and livestock
insurance in our country, there are also several problems to introduce crops insurance
in Bangladesh. These problems can be discussed by dividing them among two
categories –

a. Procedural Problems:
1. To shape the overall process of the crops and livestock insurance in the
country we required some competent workforce. But Bangladesh has not
had such specialist, expert workforce to shape the country’s overall
agricultural insurance.
2. Agricultural Insurance or Insurance has not considered any separate field
of study in our country.

b. Implementation Problems:
1. Most of the farmer of the country are illiterate and do not know how to
read and write and they mostly belief in various myth and conventional
process of agricultural, so making them conscious about the agricultural
insurance, especially in crops insurance and livestock insurance, will be
not so much easy.
2. As natural calamities of Bangladesh occur every year in great extend, the
insurance companies can fall in loss because of high loss covering.
3. There is a lack of agricultural data in the country and there is no estimation
about the prospects of such type of insurance business in the country.
4. Another one is that most of our farmers are live much below the poverty
line. So most of them will enable to bear the premium for the crops
insurance and livestock insurance.
5. Agricultural insurance, mainly the crops insurance, required expert person
in root level to make assessment of agricultural products (crops).
Successiveness of agricultural insurance mainly depends on that. But in
our country it is difficult to find such expert person to work in root level.

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6. If implementation authority want to employ expert person in the root level,

they required to paid more to them, which will high the cost as well as
high the premium.

Suggestions for Implementations:

Based on the discussion of this chapter we can see that there are a lot of potentials of
crop insurance and livestock insurance in our country. But there are also some
problems to implement these types of insurance project in our country. Due to the
lack of proper strategic plan and unskilled workforce, we have already once shut
down our agricultural insurance project after starting. So if we want to implement
these types of insurance project, we need to consider some factors. The factors should
be as follows –
1. First we have think about two aspects – one, we have to create a financial
security for our farmers through these types of insurance policies and other;
we have to make this business profitable. So number of perils that are covered
by the insurance policies must be predetermined in a way so that insurance
organizations can also survive in the market.
The number of perils that will cover by these types of insurance policies can
be as follows –
 Fire & Lightning
 Storm, Cyclone, Hailstorm, Typhoon, Tempest, Hurricane, Tornado
 Flood, Inundation & Landslide
 Drought, Dry spells
 Pests / Diseases
2. Make a total roadmap or a strategic plan for the project so that everyone can
identify where we are now and where we want to go.
3. In first few years the government has to do supporting activities for
organization that will provide crop insurance and livestock insurance facilities.
Government may give some subsides in first few years.
4. Create Insurance as a separate field of study and make institutions to make
trained workforce for agricultural insurances. If our workforce is trained we
can exactly measure the risk and can avoid adverse selections.

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5. Premium should be set a low level so that most of the farmer can take the
insurance policies. For this regard government can subsidized this sector for
first few years.
6. Arranging some campaign to make the framers aware about these types of
insurance policies.
7. Make the insurance policies available for all types of framers rather than make
them available for specific categories of farmers.

CHAPTER 3
COPARATIVE ANALYSIS OF CROP & LIVESTOCK INSURANCE
IN VARIOUS DEVELOPED & DEVELOPING COUNTRIES

Agricultural Insurance in India:

India has started crop insurance project at time when we also has started our crop
insurance. A crop insurance scheme linking institutional credit (crop loan based on
area approach) was suggested by Prof. Dandekar in 1976 & this scheme called as
CCIS (Comprehensive Crop Insurance Scheme) was implemented from kharif 1985
on all-India level. The objectives of the scheme were - giving financial support to
farmers in the event of crop failure as a result of drought, floods and credit eligibility
of farmers after a crop failure for the next crop season. All natural risks were covered
excluding nuclear and war risks. Premiums as well as the indemnity rate for notified
crop were uniform for all insured farmers irrespective of their actual yield.
Indemnities were paid to all insured farmers when average output of a given area fell
below the normal output. The CCIS was in operation until Rabi 1999. On June
23,1999 the Prime Minister launched a new crop insurance scheme called Rashtriya
Krishi Bima Yojana (RKBY) under the National Agricultural Insurance Scheme
(NAIS). Participation in RKBY was compulsory for farmers growing notified crops
and availing crop loans from formal credit Institutions. In case of loanee farmers, the
Sum insured was equal to the amount of crop loan advanced. The farmer had the
option to insure the amount equivalent to the value of threshold yield of the insured

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crop. A farmer may also insure his crop beyond the value of threshold yield level up
to 150% of average yield of notified area on payment of premium at commercial
rates. The risks covered under the NAIS are:
 Fire & Lightning;
 Storm, Cyclone, Hailstorm, Typhoon, Tempest, Hurricane, Tornado;
 Flood, Inundation & Landslide;
 Drought, Dry spells; and
 Pests / Diseases.
Exclusions: War, nuclear risks, malicious damage. (G. Venkatesh, Mumbai)

In India the Livestock Insurance Scheme, a centrally sponsored scheme, which was
implemented on a pilot basis during 2005-06 and 2006-07 of the 10th Five Year Plan
and 2007-08 of the 11th Five Year Plan in 100 selected districts. The scheme is being
implemented on a regular basis from 2008-09 in 100 newly selected districts of the
India. Under the scheme, the crossbred and high yielding cattle and buffaloes are
being insured at maximum of their current market price. The premium of the
insurance is subsidized to the tune of 50%. The entire cost of the subsidy is being
borne by the Central Government. The benefit of subsidy is being provided to a
maximum of 2 animals per beneficiary for a policy of maximum of three years. The
scheme is being implemented in all states except Goa through the State Livestock
Development Boards of respective states. The scheme is proposed to be extended to
100 old districts covered during pilot period and more species of livestock including
indigenous cattle, yak & mithun. (Source:Ministry of Agricultural, India)

Agricultural Insurance in China:

China is the world's most populous country and one of the largest producers and
consumers of agricultural products. China uses intensive farming practices to produce
large amounts of food and fiber from limited supplies of land, water, and other natural
resources. Agricultural insurance first appeared in China more than seven decades
ago. In the 1930s and 1940s, some regions of a few provinces began to provide
agricultural insurance, and the China Agricultural Insurance Company Limited was
established. But that attempt was ephemeral due to the high risk of agricultural

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insurance, weak economy and lack of policy protection at that time. After the
establishment of the People's Republic of China in 1949, the original People's
Insurance Company of China learned from the agricultural insurance model of the
former Soviet Union and implemented a trial business of agricultural insurance. But
that try was suspended by the government in 1953 for the purpose of gathering all
strength to ensure agricultural production

The Chinese crop insurance program has a long history of providing protection to
farmers that grow crops under difficult environmental conditions. According to the
World Bank, more than 20 percent of the total farmland (estimated at 301 million
acres) has been affected by natural disasters during the last 30 years. During 2004
alone, it is estimated that Chinese farmers lost close to $18 billion worth of crop value
due to adverse weather conditions. The most common form of crop insurance in
China is Multi Peril Crop Insurance (MPCI), which acts as a loss-of-yield guarantee
against a variety of climatic perils. Even though most (if not all) Chinese provinces
currently have a crop insurance program under way, the most well-established ones
are those operating in the Heilongjiang, Xinjiang, Jilin, Shanxi, Shandong, Jiangsu,
Shanghai, Henan, Anhui, Zhejiang, Hunan, Guangdong, and Hainan provinces, which
not surprisingly are also the country’s key agricultural regions. Interestingly, for most
of the 1990’s and until 2006, crop insurance premiums remained flat, well below the
$100 million mark. Historically, this low participation has been explained by the lack
of a crop insurance program suitable to the needs of limited resource farmers, a lack
of education about crop insurance instruments, issues concerning the computation of
premium rates that biased the actuarial fairness of the program in some key regions, a
lack of capacity of the domestic crop insurance companies to maintain and support the
program, and the lack of high quality, detailed loss and claims data that could be used
for pricing.

The Chinese government has been working to solve the regulatory and informational
constraints affecting the program. A major shift in farmer participation occurred in
2007 when the Chinese government introduced an agricultural insurance premium
subsidy program that increased the subsidy rate by 200%. Compared to the flat
growth of the past decades, participation in the program exploded: the crop insurance
premiums in 2007 were close to $800 million. Most recently, in November 2008 the

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China Insurance Regulatory Commission (CIRC) reported that premium volume

reached $1.6 billion, thus becoming the second largest crop insurance program in the
world behind the U.S. program. (Helen Ye and Dr. Oscar Vergara)

Agricultural Insurance in USA:

In the history of agricultural insurance of USA first insurance, known as hail
Insurance, was offered in 1880. By 1919, hail insurance protection had increased to
560 million dollars in the USA. In 1938 Congress formed the Federal Crop Insurance
Corporation (FCIC) with three objectives in mind –
1. to protect the income of farmers against crop failure or price collapse;
2. to protect consumers against shortage of food supplies and extreme of prices;
and
3. to assist business and employment by providing an even flow of farm supplies
and establish stable farm buying power.

The original program was delivered by the Agricultural Stabilization and

Conservation Service (ASCS) employees with insurance only available on wheat and
cotton. Participation was very low and losses were extremely high. In fact, due to
heavy losses in the early 40's, the program was discontinued but restored in 1945. In
1947, Congress reduced the scope of the program in order to mitigate losses. From
1953 until 1980, FCIC delivered the program through its own employees. This effort
also suffered from low participation, but loss ratios were much lower than in the early
program. Losses were brought under control because underwriting and loss
adjustment controls were introduced. The program reacted to negative experience by
increasing premiums, reducing coverage or closing sales. (source: Steven C. Harms,
Executive Vice President, Rain and Hail LLC).

The passage of the Federal Crop Insurance Act of 1980 marked the birth of the
present federal crop insurance program and the start of the public/private partnership
that has been the foundation for its success. In fact, in the years following the passage
of the 1980 Act the size and scope of the program expanded dramatically. The
number of county crop programs (i.e., an insurance contract for a particular crop in a
particular county) grew from under 5,000 in 1980 to more than 15,000 in 1983. This

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rapid increase was primarily due to the entrance of existing crop programs into new
counties. By 1990 the number of crops for which insurance was available had
increased to 50, from 28 in 1980, and nearly the entire nation’s counties were
represented in the crop insurance program. Even following passage of the 1980 Act,
however, the USDA continued to provide agricultural disaster assistance outside of
the crop insurance program in the form of direct cash payments and subsidized loans.
Over the 1981 to 1988 period the Agricultural Stabilization and Conservation Service
(ASCS) dispensed $6.9 billion to direct disaster payments, with $5.6 billion related to
crop losses and the remainder to livestock, feed and conservation programs. Payments
peaked in 1981, 1988 and 1989 due to severe droughts. The 1988 drought was one of
the worst on record, especially for central United States, and the Disaster Assistance
Act of 1988 made more than $4 billion available for disaster relief. In the following
year, the Disaster Assistance Act of 1989 provided about $897 million in ad hoc
disaster relief and allocated $1.48 billion to cover drought losses. Total disaster
payments in fiscal year 1989 exceeded $4 billion. Following widespread flooding and
drought in 1993 and 1994, the Midwest Flood and Southeast Drought Aid Act
provided another $3.25 billion in disaster payments. In fiscal year 1994 the ASCS
dispensed over $3.1 billion in disaster relief. (Source: Steven C. Harms, Executive
Vice President, Rain and Hail LLC)

The most significant change in the program occurred with passage of the Crop
Insurance Reform act of 1994 which effectively eliminated ad hoc disaster payments
offering farmers a standing disaster or catastrophic program available to all for a
small administrative fee. The impressive expansion in the crop insurance program
cited above has been achieved at a surprisingly modest cost. Total administrative
costs for the program have, of course increased, growing from less than $100 million
in 1981 to $319 million in 1994. Given the growth in the scope of the program,
however, some increase in administrative costs was to be expected. During this time,
total premiums paid increased very substantially, and the percentage of sales made by
private companies grew from 36.4 percent in 1983 to 93.2 percent in 1993. However,
on an inflation-adjusted per-insured-acre basis both reinsured company administrative
costs and total program administrative costs have declined since the mid 1980's.
(Source: Steven C. Harms, Executive Vice President, Rain and Hail LLC)

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During its earlier history in the United States, practically all live
stock insurance was written on draft horses, consisting of farm work horses, and
breeding stock, but with the advent of the tractor, the farm horse values dropped
to comparatively nothing, and with them went the values on pure-bred draft
stallions and brood mares, resulting in the loss of nearly all of this source of
revenue to the companies writing this class of business. Then came the
World War, which was responsible for peak prices on cattle and hogs. Vast
sums of money were invested in herds of cattle and hogs. It was an
every-day occurrence for single animals to sell at public venture
and private treaty for sums running into thousands of dollars,
thereby opening up a new field for live stock insurance companies. (Source;
S W Swain, Western Livestock Department, Hartford Accident and Indemnity
Company)

Agricultural Insurance in Australia:

Australian agriculture contributes approx 3% to country’s GDP but also utilizes a
large proportion of natural resources accounting for 75% of stored water and almost
60% of land area.
The insurance for the agriculture has been developed since 1987. At present over 85%
of planted area is insured. The crops that are covered by the various corps insurance
policies are – apples, pears, stone fruit, tomatoes, table grapes mandarins, grapefruit,
kiwifruit, peaches, nectarines, oranges, limes, lemons etc. The perils covered by the
various insurance companies are –
1. Hail
2. Fire
3. Frost (limited)
4. Lightning, windstorm, malicious acts (under conditions)
[Source: Steven Green (Managing Directors) and Dr. Olena Sosenko (Technical
Manager), primacy Insurance Co.]

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Agricultural Insurance in United Kingdom and European Union:

In the EU there is a high level of support for the agriculture sector, with various CAP
instruments reducing the level of income variability faced by farmers. However, in
addition to these measures most countries have specific measures designed to help
farmers manage risk, either by preventing or reducing its occurrence (e.g. vaccination
programs) or reducing its consequences (e.g. insurance/futures/income smoothing).

With regard to insurance type schemes, the level and extent of coverage and
subsidization can vary widely from country to country with programmers down to
regional level in some European countries. In 2004, it is estimated that 23% of EU-27
crop value was insured. Premiums amounted to €1,583 million or 4% of the insured
value and subsidies amounted to 32% of premiums. Some examples of agricultural
insurance type schemes in European countries are detailed in this section.

In the UK the private insurance sector provides conventional hail insurance coverage.
There is no government involvement and price and yield risks are not covered by
insurance. In relation to livestock, the Government provides compensation for the
compulsory slaughter of livestock following specific infectious diseases. However,
the private insurance sector also provides for insurance cover for certain diseases to
top-up the Government compensation where compensation is provided, and to
provide indemnity for the slaughter of livestock where no compensation is available.

Diseases covered by the insurance sector includes foot and mouth, tuberculosis,
brucellosis and classical swine fever. The total number of animals covered by private
sector insurance companies is approximately 1,280,000 representing 2.6% of total
cattle, sheep and pig herds. Production value covered by insurance in the UK is €760
million.
(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

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Agricultural Insurance in Spain:

In Spain, agricultural insurance policy is decided centrally providing guidelines to

autonomous regions, which can apply it to suit their own needs. The Spanish system
is based on the following principles:
 universal application: every effort is made to cover as many risks, farmers
and area as possible;
 voluntary purchase: nobody is forced to purchase insurance;
 insurance is your responsibility: emergency aid will not be paid for disasters
where the risk was insurable, while insurance companies cannot refuse to
insure someone for an identifiable risk;
 full coverage: those seeking insurance must cover their entire holding.

Some 70% of agricultural insurance policies are for non-livestock sectors, reflecting
the relative importance of crop production in Spain. Insurance was extended to the
livestock sector to cover the risk of injury to animals in the 1990’s. Livestock
insurance is only available as a comprehensive package, that is, all animals must be
covered for the specific risk. More recent insurance schemes allow cover for BSE,
foot and mouth disease, blue tongue and swine fever. Fallen animals are insured by a
complicated system, involving central, regional and private funding with each region
deciding on the level of support that they will provide. It is reported that in some
regions the state pays up to 80% of insurance costs with reports of up-take being as
high as 93% in places. The state is promoting the idea of a single policy to cover all
risks (accidents, disease, public liability, buildings fire, theft, etc).
(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

Agricultural Insurance in Italy:

Current risk management policy in Italy is attempting to introduce and promote new
types of insurance cover, while at the same time, rationalize public expenditure on
compensation. Every year, each region specifies the coverage, products and
municipalities for which they are going to allow subsidized insurance and which will

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therefore, be excluded from any grants of compensation. Farmers are not obliged to
take out insurance, it is voluntary.

Subsidies policies were extended to cover cattle and buffalo farms in 2006, previously
policies had been limited to crops and structures. Diseases covered by insurance
included foot and mouth brucellosis, pleura pneumonia, tuberculosis and enzootic
leucosis. Compensation is paid for the value of the animal (excluding any other state
contribution to compensation), it also covers loss of revenue for the period of
stoppage of the farm and the costs of disposing of dead animals (again excluding any
other State contribution).
(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

Agricultural Insurance in Greece:

Insurance is compulsory for farmers. ELGA (an independent State organization)

provides insurance type products for crop and livestock against a number of risk
factors giving full coverage of crop production and livestock in Greece. Crops are
covered against hail, frost, windstorm, flood, excessive heat, excessive or out of
season rainfalls, snowfall, sea water and damages caused by bears and wild boars.
Generally losses up to 20% per crop and per field are not covered.
As well a losses arising from climatic incidences, livestock are covered for losses
caused by wild animals and the following diseases: anthrax, blackleg, viral diarrhoea,
malignant catarrhal fever, gangrenous mastitis, pathological dystokia, contagious
agalactia.

There is also private insurance in Greece although this market is less developed. It
includes a hail crop insurance and livestock mortality insurance for bovines, sheep,
goats, pigs and poultry.
(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

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Agricultural Insurance in Canada:

In Canada, production insurance is available for a range of crops as well as a more

comprehensive Canadian Agricultural Income Stabilization program (CAIS).
Production insurance has been available for the past 40 years on a voluntary basis for
farmers. The cost is shared between producers and Government (at both federal and
provincial level). Provincial governments take responsibility for program design and
delivery, while the Federal Government contributes to premiums, administrative costs
and re-insurance to some provincial agencies. Over half of Canadian farmers are
insured covering 65%-70% of crops. Whilst single and multi-peril insurance on crops
and assets are available, market failure or price declines are not insured.

CAIS is based on a whole farm approach rather than commodity specific support.
When farmers’ income or ‘‘production margin’’ fall below their recent average (last
five years excluding the highest and lowest) producers are eligible for compensation.
The level of compensation depends on the magnitude of the loss, with smaller losses
generally shared equally by producers and the Government, while a larger proportion
of higher losses are borne by the Government. Losses are based on annual tax returns.

(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

Agricultural Insurance in Ireland:

Agricultural insurance systems never really developed in Ireland. Two-thirds of Irish

agricultural output is from cattle either as beef or dairy products; such commodities
have historically been supported through various price support mechanisms and direct
payments in more recent years. Such support insulates their income from much of the
impacts of market and price volatility and would limit the requirement for insurance
type systems. The cost of the programmes was over €60 million in 2008. The
programmes are funded by both public funds and the farming community who
contribute through disease levies imposed at points of slaughter for cattle and on milk
deliveries. Annex 1 contains details of total costs, compensation payments and disease
levies paid by producers in the period 2000-2008.

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Fluctuations in output are more evident in the crops sector. Cereal production
accounts for 4% of gross output in Ireland. Due to issues of soil type, as well as poor
growing condition in the North and West, this production is limited to 300,000-
400,000 hectares mainly in the south-east of the country. Large annual variations tend
to be most evident in the potato sector, where some type of insurance system may be
worthy of consideration.
(Source: Agricultural Insurance, Ministry of Agriculture, Irelands)

Findings of Comparative Analysis:

To strengthen the economy of the country, we have to at first strengthen the base of
which the economy stands for. Our country’s economy is mainly based on the
agriculture. If we want to strengthen the economy of our country, we have to first
strengthen the agricultural of our country; but most of the framers of our country are
live below the poverty line. They become totally helpless when natural disasters
damage their crops and livestock. So we need to compensate them that times, for that
insurance can the best source.

If study the agricultural sectors of the various developed and fastest growing
developing countries, we will see that the countries whose economy is based on
agriculture have provided great emphasis on the agricultural insurance. They have
specific strategic plan, laws and regulations on the agricultural insurance systems for
protecting their framer. They categories their agricultural insurance policies to serve
various categories of framer and to give them financial support in time of crisis. Some
countries have public private partnership (PPP) project in this sector. Some countries
have both governmental agricultural insurance companies and private agricultural
insurance companies to serve their framers. Besides we can say all of these countries
government and governmental organizations have played a pioneer role for
agricultural insurance.

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CONCLUSION & RECOMMENDATION

If we see the above discussion we will found that most of the developed countries
even the developing countries, which is considered as future market leader like –
India or China, have a very strong policy of agricultural insurance, especially in crop
insurance and livestock insurance. Moreover in our country most of the people,
especially the village people, are directly involved with the agricultural production
process. In the developed countries where only 10% – 20% people of total population
produce the whole agricultural production, in our country the ration is over 70%. And
the other side is that most of them are far below the poverty line.

In our country natural disasters are regular phenomena. Every year there is a flood or
drought or cyclone. They cause huge loss of our agricultural products and damage the
houses of the poor peoples. These losses are ultimately bear by the poor people who
are mainly the framer. As a result they cannot regain their previous situation and
cannot restart the production. So government should take the proper initiative to
restart the agricultural insurance in the country to help the poor farmers. However,
there might be a number of issues need to be resolved first including the methodology
to be adopted, organizational structure, mechanism of distributing losses, etc. The
Public Private Partnership (PPP) can play a great role in agricultural insurance sector,
which government has already taken for other sectors. The study concluded that if
implemented properly there should not be any reason that crop insurance is going to
be a big loss for government rather it can restore confidence among bankers to invest
more and systemize the agri-credit schemes.

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References:
1. Crop Insurance as a Risk Management Strategy under Future Climate Change:
Bangladesh Context (Dr. Mizan R. Khan and Dr. Md. Sirajul Islam, Department of
Environmental Science & Management (DESM), North South University, Dhaka,
Bangladesh).

2. Bangladesh Bureau of Statistics, Agricultural Census 2007.

3. Climate Change Impacts and Responses in Bangladesh by Saleemul Huq and

Jessica Ayers, International Institute for Environment and Development, London.

4. Hamid, M. A. (1991). A Data Base on Agriculture and Foodgrains in Bangladesh

(1947-48 to 1989-90). Dhaka, Bangladesh.

5. Crop Insurance in India – A study By Shri G. Venkatesh, Mumbai.

6. Website of Agricultural Ministry of India.

7. History of Crops Insurance in the United States, by Steven C. Harms, Executive

Vice President, Rain and Hail L.L.C.

8. Livestock insurance by S W Swain, Western Livestock Department, Hartford

Accident and Indemnity Company

9. Agricultural Insurance, Ministry of Agriculture, Irelands

10. Crop Insurance in Australia, by Steven Green (Managing Directors) and Dr. Olena
Sosenko (Technical Manager), primacy Insurance Co.

11. Crop insurance experiences: Lessons for Bangladesh by Nurul Haque Miah (the
daily star, june 21 2005)

12. Brac plans crop insurance for farmers by Kawsar Khan (the daily star, march 23
2010).

13. Microcredit and Agriculture: How to Make it Work by M. A. Hakim.

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