[보푸라기]Is there insurance that compensates for the decrease in harvest due to higher cabbage prices?

As the price of cabbage soared ahead of kimchi season, mothers’ sighs deepened. Fortunately, prices soon stabilized as Chinese products were imported. But I suddenly wondered why the price of cabbage had risen and whether farmers could receive compensation in times like this.

It’s an unfamiliar area to people living in cities, but I also remembered ‘crop disaster insurance’, which I heard about at a recent press conference. Let’s take a look.

‘This insurance’ compensates according to the harvest amount

It is said that these days, with many natural disasters occurring due to abnormal climate, farming has become more difficult. There are insurance companies that take emergency measures when farmers are depressed due to a sharp drop in harvest. This is NH Nonghyup Non-Life Insurance, which sells crop disaster insurance.

Crop disaster insurance is a product that compensates for crop damage caused by natural disasters such as typhoons, hail, torrential rain, earthquakes, and fires. This is the exact opposite of the policy of health insurance or travel insurance, which states that damage caused by natural disasters is not compensated.

Crop disaster insurance products include △field crops △orchard crops △horticultural facilities △rice and pulses △mushrooms △import stabilization insurance, etc. There are a total of 73 agricultural products, including apples and pears, which we are familiar with, as well as rice, potatoes, sweet potatoes, beans, and blueberries.

Coverage includes production costs, re-seeding, reduced harvest, and inability to cultivate. The most representative of these is loss-of-return insurance. If this year’s harvest is lower than the average year, the uncompensated reduction amount and deductible ratio are deducted from this reduction amount and insurance money is paid. Uncompensated loss refers to the amount of crops reduced due to reasons other than natural disasters specified in the terms and conditions.

The method of calculating insurance premiums is also unique. The amount of damage is measured at 50-100% by dividing it into △when the price is expected to fall compared to normal crops when shipped to the market, △when market shipment is impossible but can be supplied for processing, and △when it cannot be supplied for processing.

Like health insurance, you cannot always sign up for it, and there is a set time for signing up for each crop. For example, you can sign up for carrots until the end of August, spinach until the end of October, and green onions until June 15th. The coverage period usually lasts until one year after harvest begins, but it may vary depending on the crop.

Insurance premiums vary depending on the product, growing region, and cultivation area. Farmers do not bear all of this, but the government supports 33-60% and local governments support 30-50%.

Natural disasters become more frequent and loss rates rise.

Nonghyup Insurance is the company that virtually exclusively handles this insurance. As of last year, crop insurance accounted for 26.8% of Nonghyup Insurance’s total raw material insurance premiums.

However, crop disaster insurance is a product with great ups and downs. As natural disasters become more frequent due to the climate crisis, it has become difficult to estimate the loss ratio of crop disaster insurance. This insurance’s loss ratio was 74.2% and 65.2% in 2021 and 2022, but last year it was in the red at 107.5%.

In particular, the damage to farms seems to have been severe this summer, when heavy rain and heat waves struck in succession. According to the third quarter performance report recently announced by Nonghyup Financial Group, Nonghyup Non-Life Insurance’s net profit for the period was KRW 151.8 billion, a 59.8% increase from the previous year. Nonghyup Insurance explained that the loss ratio of crop disaster insurance increased and that it defended its performance by making up for it in general insurance.

Crop disaster insurance is, in fact, a strong policy product, so Nonghyup Insurance feels uncomfortable regardless of whether it is in deficit or surplus. There are many disputes over the moral hazard of subscribers and the calculation of insurance premiums. There is even a joke in the industry that we are ‘the only company with a 100% loss ratio’.

An official from Nonghyup Insurance said, “Although the subscription rate is steadily increasing, there are still farmers who are reluctant because they feel the premium is burdensome or distrust the system itself. We are trying to upgrade the method of calculating insurance premiums and benefits and expand the subscription items.”