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Agro-insurance Must Step-by-Step Move Fully to Commercial Basis

For the last few years, the state has been implementing several important projects in the field of agriculture. In 2017, the budget of the Ministry of Agriculture has decreased compared to previous years. However, there are projects that still continue. One of them is the project of Agro –Insurance.

The state’s participation in the agro- insurance program from the current year will be 70% for all crops, but as for the vine it will be -50%. If the farmer has not registered the land, the size of subsidy increases by 10 %. It should be noted that, initially the agro –insurance program was offering farmers harvest subsidizing from 70 to 95 %.

Legal and physical entities who are the owners, users or have in actual ownership not less than 5 ha of plot, including agricultural land, can participate in the agro-insurance program. The exception is the wheat and the beneficiary will be able to participate in the program if it owns no more than 30 hectares of wheat. As well as any beneficiary who is the owner of 100 or 200 hectares of land and who insure 5 he of plot, will get co-financing from the state.

This year 7 million Gel was allocated from the budget for the new program of agro –insurance, which is less for 3 million Gel than the last year’s financing.

The state program of agro-insurance has started in 2014 and it has been undergoing for 3 years already. The aim of the project is the development of insurance market in Agro sector, supporting agriculture activities, maintenance of income of people who are engaged in these activities and reducing risks.

The interested beneficiaries are able to get insurance policy in 4 insurance companies.

Interested beneficiaries will be able to purchase insurance policies in 4 insurance companies operating in Georgia:

  • Aldagi
  • JPI Holding
  • IC Group
  • Ardi group

Within the program the policy will cover the following insurance risks:

  • Hail
  • Flood
  • Storm
  • Autumn frost (only for citrus crops) the period from the 1st of September to 30th of November.

It should be emphasized that in 2014-2016, within the agro-insurance program there was issued 47,485 policies; the insured area amounts 39,138 ha; totally there was insured harvest of 326,842,630 GEL; the state has subsidized 22,051,912 GEL from the amount which the farmers had to pay for the insurance service. During the 2 years the compensation has amounted to 19 million GEL.

In 2014 the pilot program of agro-insurance had 21 thousand beneficiaries.

In 2016, the above mentioned program was using 16 thousand people. Despite the fact that in 2016, far fewer people used agro-insurance than it was in 2014, it should be mentioned that the number of beneficiaries in 2016 compared to 2015  have been doubled.

In general the farmers’ attitude towards the results of the project was unmatched.

Some of them are satisfied, and some are disappointed. The reasons for their dissatisfaction are the several factors:

-The farmers are not fully informed about the present project, correspondingly when the fact of loss appears, only after that they get the information about the project details and it often leads to the conflict situation. The state has taken some steps concerning the issue of providing the farmers with information regarding agro-insurance and it has already got result. In 2016, the number of people who used the agro –insurance has been doubled, than it was in 2015. However, in this direction there is still much to do.

– Assessment of loss is not made by a common method by all insurance companies, accordingly in this direction the dissatisfaction is frequent, because people who are affected in one zone, are compensated in various percentages by different companies.

-In general we think that the agro-insurance has to move step by step fully to commercial basis and this might become more attractive for the insurance companies. The state should not pay to peasant or farmer for lack of knowledge, although we have to reach to such result. The way out and the only way to achieve this aim, is the import of modern technologies and knowledge in Georgia, in order to make our agriculture beneficial and to produce more product in one unit area. All these will definitely bring the result. The state will not spend money in the agro-insurance program and it will be beneficial sphere for the insurance companies. Consequently, the tariffs of these companies will fall down and the farmers will benefit from the agro insurance product.

Article by Irakli Chikava Commercial director of Consulting Company“Agro Solutions”