The possible removal or lowering of the government’s share in the premiums of crop insurance via the Philippine Crop Insurance Corp. (PCIC) may result in higher premiums for farmers which will discourage them from securing crop insurance, a farmers group said.
The Federation of Free Farmers (FFF) said banks will thus find it too risky to lend to farmers whose crops are uninsured.
The PCIC charges a premium to cover expected claims from farmers arising from crop losses. This premium is divided among the parties which have an insurable interest or stake in the insurance policy — the farmer who stands to lose his crop, the lending bank which may be unable to collect from the farmer and the government which is duty-bound to help farmers recover in order to sustain the country’s food supply.
The government’s so-called subsidies are actually payments for its share in the total premium.
Finance Secretary Carlos Dominguez III earlier said the government through the PCIC has extended P23.3 billion in subsidies to PCIC over the last 20 years and noted this is “not sustainable.” This hinted the possibility of the government’s withdrawal of support.
FFF national manager Raul Montemayor said fund transfers to PCIC increased in recent years due to the government’s decision to fully cover the premiums for marginal and non-borrowing farmers and to expand the program’s coverage to other sectors like livestock, which were affected by the African swine fever.
FFF also said supplemental funding came from mandatory allotments under specific laws, such as the Agri-Agra Law and from budgetary allocations from Congress, adding that the PCIC is financially stable and able to generate extra earnings from investments to cover its overhead apart from being protected from extraordinarily large claims through reinsurance.
“Under these conditions, private firms are unlikely to enter the crop insurance business. Moreover, almost all crop insurance programs in the world are directly or indirectly supported by governments due to the inherent risks in agriculture,” Montemayor said.
The FFF also said the PCIC has been named a top government controlled corporation for the past four years since it has been remitting dividends to the government from its net
income from operations.
Earlier this month, President Duterte issued Executive Order 148 which transferred the PCIC management from the Department of Agriculture to the Department of Finance, citing the need for “policy and program coordination” and “general supervision.”
PCIC is the government’s sole arm for providing agricultural insurance which ranges from insurance for rice, corn, high-value crops, livestock, fisheries, non-crop agricultural assets apart from credit and life-term insurance.
