The Innovative Research Of China’s Policy-oriented Agricultural Insurance Mechanisms

Agriculture is the basis of a country’s national economy, which is the first production department to produce the most basic means of production and subsistence, and has the most basic and irreplaceable status in the survival and development of human society. As a large agricultural country, we must ensure the security and stability of agricultural producing, which is directly related to our national economic development, security and stability. Agricultural Insurance is the innovation as a way of national disaster relief, it connects government intervention with market mechanisms, and plays an important role in decentralizing agricultural risk, protecting the agricultural production, safeguarding the vital interests of farmers. Therefore, it is concerned increasingly.Agricultural insurance in China has experienced booming in1980s, continued shrink in the mid-1990s, and the re-rise in the new century. The report of The Party’s Third Plenum pointed out that:explore the establishment of a Policy-Oriented Agricultural Insurance system. Then, the Policy-Oriented Agricultural Insurance experiments kicked off in China. Since then, in support of the Government, China’s agricultural insurance business is revitalizing, and plays the "stabilizer" role further. Historical practice shows that: Whether the government is involved and supports, it directly affects the agricultural insurance to carry out good or bad. The Policy-oriented Agricultural Insurance is the inevitable choice of China’s agricultural insurance.In support of the Government, China’s agricultural insurance business is expanding in the scope and scale, so is the insurance coverage and responsibilities. And the forms of organization are diversifying. The policy has made great achievements. But at the same time, the Policy-Oriented Agricultural Insurance has appeared many problems since the policy has been piloted, including market’s supply and demand cold, implementation difficulty, acts’supervision difficulty and difficulty in continued operations. There are mainly the following reasons:First, it dues to the agricultural insurance quasi-public goods nature, which is also the root reason. Second, it is decided by the particularity and complexity of China’s agricultural producing. Third, moral hazard and adverse selection is the reason, which make insurance company be passive in the procedure of technical operations. Fourth, the intensity of government support is still insufficient; the proportion of subsidies and concessions doesn’t achieve the optimal boundaries. Fifth, there are many defects in China’s Policy-Oriented Agricultural Insurance. So that there’s a large randomness from product design, undertaking insurance, inspections and scheduled loss to claims. This is not conducive to form a long-term mechanism.Against these difficulties, this paper attempts to explore an effective path to maximize agricultural insurance’s utility. According to China’s specific national conditions, and learning from outstanding foreign experience, China’s Policy-Oriented Agricultural Insurance should be followed by the specific ideas:government-led, diversified operations, multi-agent participation. On the basis of increasing support, the Government should induce actively other commercial entities’ participation, and expand the operation subject and scale of agricultural insurance. We should maximum use the market mechanisms to regulate spontaneously, the Government conducts the effective regulation and supervision and management in real time. Following the ideas, we should establish a relatively perfect operation mechanism, including incentives mechanism, protection mechanism, communication and coordination mechanism, supervision mechanism, feedback mechanism and performance evaluation mechanism. All of which form a complete organization running system, and it will inevitably contribute the healthy functioning of policy agricultural insurance, and make it maximize the benefits.