The high accident rate in the countryside registered in recent months due to the drought, the recent events of flooding, frost and hailstones constitute one of the most important reasons for concern, both for farmers who have seen their crops and their crops threatened and decimated income, as well as for the insurance companies that see their results reduced, despite the funds from the consortium and the reinsurance guarantees. For the agricultural sector, all this has been added to soaring production costs partially offset in the agricultural sector with aid for diesel consumption of 300 million euros and the 267 million expected to be distributed due to the effects of the drought in areas still to define.
Apart from the debates and positions on climate change, in relation to agricultural insurance, insurance companies, with their data in hand, point out that periods of drought are increasingly frequent. They have gone from occurring once a decade to repeating themselves every less than five years and, at this moment, two years in a row. They also highlight that phenomena such as floods are increasingly violent and that hailstones or frosts do not have a date or established territories.
As a consequence of all of this, the agricultural organizations ASAJA, UPA and COAG agree on pointing out the need to turn around the current insurance policy to defend the viability of insurance in the medium and long term and seek solutions that go beyond raising franchises, raise premiums or reduce insurable returns, which, due to lack of demand, could mean the end of an insurance that was considered the jewel of agricultural policy. From UPA it is estimated that companies could reduce their management costs as well as cut their profit margins to make insurance cheaper, so that it effectively constitutes an instrument to insure at least production costs.
From the perspective of support for the insurance policy, it can be said that the position of the Ministry of Agriculture in recent years has been very positive, raising the funds to the current 357 million euros, adding the 40 million assigned in recent months by the effects of drought. It should be noted that the State Agricultural Insurance Entity has 384 million to subsidize the premiums, added to the contributions of the autonomous communities.
The contribution of Agriculture for agricultural insurance currently represents an increase of more than 50% compared to the amount existing in the 2016-2020 period and highlights the lower contributions of the autonomous communities, which is also very unequal and would be desirable harmonize to avoid aid inequalities in the same production. From Murcia, Pedro García, responsible for agricultural insurance at COAG, does not understand that a farmer in his autonomous community has less aid to pay the premium than another in the same sector located a few meters away in the Valencian Community.
In the last year, this support policy approved by the Ministry of Agriculture meant an increase of 10 points in the payment of premiums until reaching an average of 40%, which reaches 50% with the recent increase in funds due to the drought; This figure can reach up to 65% in the case of professionals and young people and up to 70% for them due to the problem of drought.
four keys.
In the last decade, in the evolution of agricultural insurance up to its current situation, four important aspects could be highlighted. In the first place, a strong increase in the value of the insured capital: 41% more than in 2013, going from 11,540 million to 16,322 million in 2022 with 38 million tons of production and where the evolution of prices plays an important role. . The second point would be the relative stability in the number of policies taken out, around 400,000, although the insured area continues to increase to more than six million hectares.
Thirdly, it is worth noting a sharp increase in the accident rate, which has gone from an average of 500 million in recent years to 806 in 2022. And we must not ignore the forecast of exceeding 900 million this year, which which represents an increase of 60% in the last decade. Finally, a 33% increase in the amount of premiums, which in the same period went from around 600 million euros to 858 million in 2022, this last year with 384 million corresponding to subsidies from ENESA and the autonomous communities and 473 million paid by the insured.
With all this data in hand, the agrarian organizations agree on the need to jointly analyze the agricultural insurance policy to find a balanced solution between the interests of all parties in light of the evidence of a higher accident rate that it implies for companies having to pay amounts similar to those entered for the collection of premiums. A situation that does not imply that insurance companies incur losses, but that they reduce their profits in this adjustment of income from premiums and claims payments. For these cases there is a compensation fund in the Insurance Consortium -although every day it has fewer resources- and the reinsurance of the companies themselves also works. In any case, it is true that these companies see the direct benefits of their activity greatly reduced.
Outside of these accounts are the commissions corresponding to the underwriting of insurance and, in addition, the value that accessing the field with the sale of agricultural insurance may have for a company and, from there, starting to market other insurance for farmers and ranchers.
In this necessary process of turning agricultural insurance around to give more stability to the activity, there is a problem that lies in the existing imbalance in contracting volumes between lines and productions where subscriptions are massive -cereals, fruits-, with others in intermediate position -vineyard- and with those in which contracts are reduced -greenhouse, olive grove, pasture-.
From the sector media, in view of the evolution of the data, it is considered that large claims must be taken into account and also the existence of compulsory insurance with basic coverage to guarantee that all exploitation, in the event of a claim, has the possibility of covering at least that campaign the production costs.
From Agroseguro, the pool that brings together the insurance companies, its managers consider that, for more than a decade, despite the increases carried out, the premiums have not adapted to the current situation of accidents caused by climate change and, if this trend continues, they warn of the need to adopt at least one of these two options: either increase the subsidies of the Administrations for insurance payments or raise the amount of the premiums. Raising the percentage of franchises in the event of a claim or reducing the volume of insured production per hectare have been other ways already undertaken in the past to adjust your business and avoid losses.
2023-06-06 05:32:00
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