Study On The Problem Of Policy-Based Agricultural Insurance Development In China

Agriculture is a basic industry, which is to obtain products through the growth function of plant, animal, and microbial with artificial control and cultivation, and vulnerable to natural disasters and environmental changes (such as drought, waterlogging, wind, hail, cold, pests, and etc.). China is a large agricultural country, in which natural disasters frequently happen. Therefore, to explore and establish policy-based agricultural insurance system in accordance with Chinese situation to disperse agricultural risks, and protect the interests of agricultural producers, is not only an objective requirement to decrease the risk of agricultural production system and safeguard and promote the sound and sustainable development of agriculture, but also an urgent need to develop modern agriculture and establish modern rural monetary system.This dissertation attempts to adopt Quasi-Public Goods Theory, Game Theory,Institutional Change Theory and Welfare Economics Theory as theoretical analysis tools, to review the development course of the policy-based agricultural insurance system in China, to make a comparative analysis on the typical models of domestic and international policy-based agricultural insurance, and to conduct a special investigation to the pilot of Shandong policy-based agricultural insurance. On this basis, the dissertation makes an in-depth research and rational reflection on the problem of policy-based agricultural insurance in China, and puts forward relevant policy recommendations.The dissertation's main contents and conclusions are as follows:I. Based on the related theories about formation and development of policy-based agricultural insurance, it concludes that the establishment of the policy-based agricultural insurance system concerns the agricultural steady and sustainable development, which has a solid theoretical foundation, and is an important and urgent issue. According to the Quasi-public Goods Theory, regardless of risk or all risks, agricultural insurance has the basic characteristics of quasi-public goods and needs government to play an essential role in institution supply, environment creation, and fiscal subsidies, which is the fundamental reason why policy-based agricultural insurance comes into being. According to the Game Theory, the government policy support and introduction can effectively promote the enthusiasm and initiative of agricultural insurance business operators'and farmers'participation, which is a dominant factor to realize the interactive equilibrium of the government, agricultural insurance operators, and farmers. According to the Institutional Change Theory, the institution is at the basic and underlying position in the development, and therefore the research on development must attach importance to institutional construction and focus on institutional design and implementation. The government has the strongest force to promote agricultural insurance system change. It may induce or force the change through administrative, economic and legal means, and bear corresponding responsibility. According to the Welfare Economics Theory, the government can greatly increase the total social welfare if it supports the policy-based agricultural insurance. According to the Agricultural Inferiority Theory, International Trade Theory and the Agricultural Multi-functional Theory, policy-based agricultural insurance is kind of subsidy and relief payment by government to natural disasters, whose meaning is important and widespread. Policy-based agricultural insurance does not twist international trade, but also is an important agricultural support and protection measure under the framework of WTO.II. According to the extent of the government intervention and support, the development process of policy-based agricultural insurance has experienced three stages: Early Twist Stage (1950-1993), Institution Deficiency Stage (1994-2003), and Pilot Restoration Stage (2004-). Before 1994, agricultural insurance was the original and simple form of policy-based agricultural insurance, and the year 2004 was another important watershed between commercial agricultural insurance and policy-based agricultural insurance. Through the analysis on the development course of China's agricultural insurance, and the causes and inspiration of tortuous development, it shows that to government, agricultural producers and insurance companies, the implementation of such related preferential policies as government financial subsidies determines the actual supply of policy-based agricultural insurance and farmers'effective demand. Without government active involvement and strong support, the policy-based agricultural insurance is difficult to have the stable and sustainable development, and more difficult to get rid of the winding, wandering, atrophy development dilemma. This historical practice also inspires us that government intervention in a reasonable manner, rapidly establishing the legal status of the policy-based agricultural insurance, gradually increasing financial subsidies and policy support, and perfecting the relevant supportive measures, are the key to promote the healthy development of policy-based agricultural insurance and to realize the equilibrium of supply and demand of insurance at higher level continually.III. Since 2004, several provinces have explored the pilot in the development of the policy-based agricultural insurance and formed such typical modes as Shanghai Anxin, Heilongjiang Province Sunshine System, Jilin Anhua, China United of Xinjiang Construction Group, and Zhejiang Coinsurance. The similarities of these five modes are as follows: the local government leading and promoting policy-based agricultural insurance development, application of market and administrative measures to carry out insurance market expansion, and taking effective measures to prevent and disperse risk and implement "risks raising risks", etc. These institution designs have effectively promoted the pilot work. And meanwhile, restricted by the economic development level and basic development conditions of the policy-based agricultural insurance, these five modes have difference in regional characteristics, organization of operation, insurance object, security patterns and degree, government support, and diffusion effect, and etc. The practice of these development modes reveals that reasonable system design and the power of fiscal subsidy are the fundamental factors to the agricultural insurance development.IV. In 2006, Shandong government formally initiated the pilot on policy-based agricultural insurance. From the special investigation on the pilot, we can see that the pilot has achieved better effects, especially playing a positive role in dispersing agricultural risks and promoting agricultural production. However, due to the fact that policy-based agricultural insurance is still the new thing, and has just started in Shandong province, the institutional design is not perfect, and there still exist many problems such as strong administrative intervention, imperfect catastrophe risk reserve system, certain gap between farmers'actual demand and insurance responsibility, difficulty in recognizing responsibility of some risk, farmer's weak insurance consciousness and limited consumption ability, and etc.. Especially, the balanced relationship between farmers, insurance companies, and government has not been established, which will become the main factor to hinder the development of policy-based agricultural insurance in Shandong province.V. From a global perspective, about 40 countries have implemented policy-based agricultural insurance. There are some typical modes, such as developed nations'modes with the United States, Canada, Japan, and France as representatives, developing nations'modes with Philippines as representative, and the former Soviet mode. The policy-based agricultural insurance in these countries has the common features: improving the legal protection, strong government support, perfect reinsurance and mechanism of catastrophe risk dispersion, special management organization and some development mode suitable for the situation of a country. These above features are the important factors to promote and maintain the stable and healthy development of policy-based agricultural insurance. Moreover, because of difference in natural conditions and social economic development, those countries'agricultural insurance modes have significant difference in risks, insurance liability coverage, implementation fashions, and etc. The foreign successful practices of policy-based agricultural insurance reveal that we should learn beneficial experience and general rules from them, and promote the healthy development of policy-based agricultural insurance by enhancing institutional innovation and perfecting law- and policy-supporting system, in light of our country's situation.VI. To establish the scientific, efficient and perfect policy-based agricultural insurance institution in China is a long and complex project and cannot be finished in one day. It has to be done step by step with brave exploration and practice according to the actual condition of China. The key elements and issues include: to enhance legislation to improve the relevant legal institution; to establish the agricultural risk administration to develop the policy-based agricultural insurance; to improve the grant-in-aid institution to enhance the efficiency of the financial fund usage; to found the dispersal mechanism of the catastrophe risk to disperse the natural risks of the agricultural production; to improve the tax institution for policy-based agricultural insurance; to enhance the sustainable development of the insurance company; to build institution to combine policy-based agricultural insurance and agricultural credit supply;to achieve developmental-interaction of the country bank assurance; to insist on the combination of volunteering and appropriate enforcement to enhance insurance participation; to establish the institution to supervise the use of the premium fund of the policy-based agricultural insurance; to guarantee the value of the fund and realize its appreciation.