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Agriculture is an inherently risky enterprise because of so many uncertainties facing farmers. But changing weather patterns that made crops production more challenging have heightened the risks faced by agricultural stakeholders. The increasing frequency of strong typhoons and droughts gave rise to additional challenges in boosting output. Because of climate change, local farmers are usually at the mercy of drought or strong typhoons that hit their farms and wipe out their crops (See, “El Niño farm damage doubles to P2.68 billion,” in the BusinessMirror, March 28, 2019).

One of the mechanisms available to minimize the risks faced by farmers is the agricultural insurance offered by the state via the Philippine Crop Insurance Corp. (PCIC). The primary mandate of the agency that is now attached to the Department of Finance is to provide insurance protection to farmers against losses arising from natural calamities, plant diseases and pest infestations of their palay and corn crops, as well as other crops. The corporation also provides protection against damage to/loss of non-crop agricultural assets including but not limited to machineries, equipment, transport facilities and other related infrastructures due to perils insured against.

However, a study conducted by a team from the World Bank’s Disaster Risk Financing and Insurance Program found that despite the rapid increase in subsidies received by PCIC from the national government, agricultural insurance has reached only a third of the country’s farmers. The study also found that the insurance provided by PCIC is also not well targeted to ensure that taxpayers are getting their value for money (See, “PHL needs to overhaul agri insurance scheme,” in the BusinessMirror, June 6, 2022). Senior Financial Sector Specialist of the DRFIP Benedikt Signer, who presented the findings of the study, said the current agricultural insurance scheme is neither providing value for money to the Philippine taxpayer nor adequate protection to farmers.

PCIC’s insurance products are not suitable for the majority of Filipino farmers, especially for subsistence growers. Signer also noted that its paid claims are often late and do not adequately reflect losses. What’s more, PCIC enjoys a de facto monopoly in the Philippine agricultural insurance market, which discourages the entry of new players.

It would do well for the incoming administration to prioritize the overhauling of the local agricultural insurance scheme to effectively respond to the need to increase food production. Policymakers should take note of the recommendations made by the World Bank study and use it as a possible guide. The study cited several reforms that should be considered by the new administration to make the country’s agricultural insurance scheme more responsive to the needs of local planters.

The government should also explore partnerships with organizations, such as the International Fund for Agricultural Development, which launched a project with Vietnam to strengthen the supply of agricultural and climate risk insurance for small producers. Dr. Tran Cong Thang, director general of the Institute of Policy and Strategy for Agriculture and Rural Development, said the agricultural insurance development strategy recommended by IFAD is one of the important elements of Vietnam’s national agricultural insurance strategy.

Citing the need to urgently address the looming food crisis in the country, President-elect Ferdinand “Bongbong” Marcos Jr. on Monday said he will temporarily head the Department of Agriculture. Farmers welcomed his decision, as they now have a chance to directly communicate to the President the urgent need to protect planters, which is the most important step to ensure the country’s food security.