Crop Insurance

Highlights

• The Thai government compensates farmers for crop damage at an annual average of 1.5 billion THB (44 million USD) or more. The budget for such expenditures is insufficient and disbursements do not meet the need, as annual losses average over six billion THB (176 million USD). Crop insurance is one possible way of alleviating the hardships suffered by farmers.

• Crop insurance was first introduced to Thailand and Southeast Asia following the draught of 2006/2007, as a cooperative effort of the Bank for Agriculture and Agricultural Cooperatives, the General Insurance Association and the World Bank. Corn and livestock were insured against draught, using rainfall as the index for determining losses in Amphoe Pakchong, Nakhon Ratchasima. In 2007/2008, corn and livestock coverage was expanded to a number of areas in Lop Buri, Saraburi and Phetchaburi provinces, based on data from Pakchong. However, regional variations in rainfall and soil conditions created problems in evaluating losses. For the 2008/2009 season, experts were hired to keep statistics on rainfall, humidity and soil conditions in three new provinces in order to adjust policy premiums.

• About 32 hectares were covered, with premiums of about a million THB (29 thousand USD), in Amphoe Pakchong, Nakhon Ratchasima Province; Amphoe Wichianburi, Petchaburi Province; Takfa, Nakhon Sawan; and Buachum and Chayabadan, Lop Buri.

• One problem facing crop insurance is that too few farmers participate, as they do not understand the insurance model of managing risk. Insurance companies have high operating costs, in particular for the purchase and placement of automatic rainfall measurement devices. These devices are necessary to the program and cost 50 to 60 thousand THB (1,470-1,760 USD) each. The World Bank is covering the cost of soil and rainfall experts.