U.S. not alone when it comes to crop insurance
Approximately 86 percent of planted cropland in the U.S. is protected by crop insurance.
The end result? Even when farmers were hit with a string of natural disasters, there wasn’t a single call to Congress for expensive disaster aid.
While the U.S. is acknowledged as the leader in the crop insurance industry, other countries are following its lead, innovating their own farm support programs and seeking to find one that offers maximum protection for their farmers.
“Crop and livestock insurance is becoming an important tool to manage agricultural risk globally,” said John Drakeford, an analyst for the English insurance company Aon Banfield.
He notes a growing demand for crop insurance products that would protect farmers against hail, excess moisture, frost and other weather-related risks as well as uncertainties in commodity prices.
In France, a system of “risk coping” took effect in 1964 when the government introduced an agricultural disaster payment program, which was jointly shared by farmers and the government. The program suffered from “low indemnization,” (low compensation) according to Yves Salmon, advisor to the CEO of the Groupama S.A. insurance company, and did not really get enough support from farmers. France is a leading producer of wheat, sugar and wine products.
In 2000, the program became a three-way effort when private sector insurance companies became involved. French farmers were assisted through a tax-free ‘savings account’ over a period of five to seven years, said Salmon. The government played a big role during major disasters by providing payments and acting as the “insurer of last resort.”
Over the years, France’s insurance subsidy programs evolved. As of 2010, the crop insurance program subsidized 65 percent of farmers’ premiums, up from 35 percent in 2005. Yet participation continues to lag, Salmon said. Twenty-five percent of main crops are not insured, he said, as are 53 percent of wine production and 59 percent of fruit and vegetables. But some small farmers are “staying out of the program,” Salmon said, again because of low compensation.
Right now, France is looking for ways to fine-tune its crop insurance program to ensure wider coverage and support from the farming sector. Salmon said the government is seeking to offer subsidies to livestock and dairy to protect farmers and make the industries globally competitive.
“Building an agricultural insurance scheme takes time,” he said. “It’s a long-term effort.”