According to the Prime Minister’s decision, the pilot program for agricultural insurance (AI) began on July 1, 2011. Yet so far, only 3 out of 20 provinces have signed contracts with insurance providers because farmers consider the premiums too high, even with government subsidies.
High Premiums and Inadequate Coverage
Bac Ninh is one of the 20 provinces implementing the AI pilot program, covering pigs, chickens, and ducks in three districts—Yen Phong, Thuan Thanh, and Que Vo (three communes in each district). But so far, no contracts have been signed. Vu Thai Ninh, Head of the Livestock Division at the provincial Department of Agriculture and Rural Development, said training sessions have been held at district and commune levels. “In early April we just finished training and informing farmers. We will sign contracts afterwards because during the winter–spring crop, everyone was still busy in the fields,” Ninh explained.
When the premium rates were announced, many farmers protested that they were too high. For households that are not poor or near-poor, even after a 60% government subsidy, the farmer still must pay 3,600 VND per chicken or duck for a 2–3 month raising cycle. A meat poultry flock of 200 or more birds (or a laying flock of 100 or more) would cost about 720,000 VND. For pigs, the rate is 120,000 VND per animal. These premiums are significant for farmers, making them cautious. Meanwhile, only 4–5% of households in these districts are classified as poor. In the three districts combined, there are only about 40,000–50,000 poultry and around 10,000 pigs, but the number eligible and willing to buy insurance remains small.
In Thai Binh—one of two Red River Delta provinces selected for the AI pilot on rice—the program is also stalled. The province planned to cover all communes in three districts (Vu Thu, Thai Thuy, and Tien Hai) over a total area of 65,700 ha, with a premium rate of 5.23%. In Nguyen Xa commune (Vu Thu district), registration forms have been printed but not yet distributed.
Nguyen Phi Hung, Head of the Nguyen Xa Cooperative, said some real risks needing coverage are not included. For example, rice insurance covers yellow dwarf, ragged stunt, black-streak dwarf diseases, and brown planthopper infestations, but these problems rarely occur locally. On the other hand, rats, which cause significant damage, are not covered. “The insurance premium is also high—20,000 VND per sao per crop, about 40,000 VND a year, equal to 10 kg of paddy rice per member. Farmers are already contributing for village roads, schools, and other funds based on land area. Adding this cost would be burdensome,” Hung explained.
Bui Anh Toan, Director of Bao Viet Thai Binh, said the company is still trying to convince farmers. About 10% of households are poor; perhaps 70–80% of these might join. “Ideally, if you collect premiums from each farmer, you should also compensate each farmer. But agriculture here is fragmented. If only a few dozen households suffer yield losses and the overall affected area does not meet the compensation threshold, those farmers will have to bear the loss themselves,” Toan noted.
Possibility of Reducing Premiums
Among the 20 pilot provinces, 10 were assigned to Bao Viet Insurance and the other 10 to Bao Minh Insurance. Bao Viet has signed contracts in Nghe An, Phu Tho, Dong Thap, and is preparing in Soc Trang. Bao Minh has yet to sign any.
Nguyen Quang Phi, Deputy General Director of Bao Viet, told Tien Phong newspaper that premium rates and the insurance model were carefully studied over two years before submission to the Ministry of Finance and the Government. “Premiums reflect risk levels. Agricultural insurance carries high risk, so premiums are high. We analyzed 20 years of local data—climate, soil conditions—based on international pricing models and negotiated with global reinsurance firms. Vietnamese agricultural insurance premiums are actually more favorable than in countries such as China, Thailand, and the Philippines,” he explained.
According to Phi, insurers do not aim for profit but to support the Government’s rural development policies. However, for many farmers, even 10,000 or 20,000 VND is expensive and, due to traditional production habits, they may not fully understand the benefits.
“To reduce premiums,” Phi said, “if by the end of this year premium collections produce a large surplus, we may propose to the Ministry of Finance and the Government to transfer the surplus into a support fund to lower farmers’ premiums in subsequent years—or back into the state budget to reinvest in agriculture.”
Under the rules and coverage of AI, maximum compensation is 35 million VND per dairy cow, 15 million VND per buffalo or beef cow, 8 million VND per breeding sow, 6 million VND per meat pig, and 150,000 VND per chicken. For rice, compensation is based on actual crop losses.