Even crop-insurance system must adapt to climate change. In the Philippines, where an average of 20 typhoons occur annually, coupled with flooding and followed by severe drought, crop-damage assessment becomes more complicated.
“As a [disaster-prone] country, we need to take necessary action in preparing for greater uncertainties and risk of climate change. One way to do this is through innovative crop insurance products from our insurance sectors,” Rep. Arthur C. Yap of Bohol said.
Conventional crop insurance dwells on peril or indemnity-based products through field validation, which take up six months.
“Unfortunately, this system is fraught with moral and adverse selection hazards. There are occasions when assessors will not report the correct amount in damages and the insured not declaring all the relevant information,” Yap said during a national forum on innovative climate-risk strategies held recently in Davao City.
Yap, a former agriculture secretary, added this practice requires a tedious and consuming process fatal to farmers, who need immediate financial aid to save their damaged crops or replant to catch up with the planting season.
“The cumbersome process resulting in high cost of premiums for crop products, turn off farmers in utilizing insurance for their farming activities. It is no wonder that farmers are not interested to understand and know more about insurance,” he said.
With the system’s shortfalls, Yap added farmers, can never get out of the trap as they need to borrow money only to plant and sink into even deeper quicksand of poverty when calamities strike and wipe out their crops.
“The result is poverty from which there is no escape,” he said.
Science-based solutions
These shortfalls in crop-insurance system can be overcome using science-based tools, which is more accurate and objective.
“In India, the Caribbean and in Africa, crop insurance is offered on the basis of innovative terms. Instead of being peril based, crop insurance are based on weather index. You may think Africa is backward but when it comes to protecting their farmers, they are actually advanced,” Yap added.
“Science-based solutions provide safety net for all farmers,” Yap said, referring to the Weather Index-Based Insurance (Wibi), an integrated financing package which assessments are based on scientific data, such as rainfall, wind speed and humidity.
In Wibi an insurer no longer needs to send out assessors to engage in the tedious and time-consuming assessment, while farmers will no longer be subjected to anomalies.
“When a level of rainfall, wind-speed or humidity is breached or stuck, payments will have to be issued considering these factors that significantly affect farm yields,” he said.
In 2014 the Department of Agriculture, through the Philippine Crop Insurance Corp. (PCIC) and United Nation’s Development Program, pilot tested the project to scale-up Wibi in Mindanao, particularly in Davao region and Northern Mindanao.
“Mindanao has been a pilot site, being the country’s food basket,” Wibi National Project coordinator Israel de la Cruz said.
“This project will directly build on the alignment with key baseline development or cofinancing endeavors,” de la Cruz added.
Timely payouts, immediate recovery
The Wibi had been beneficial to PCIC owing to its lower administrative cost because field verification is not required. At the same time, farmers need not file cumbersome documents as weather stations or automatic rain-gauging reading data will serve as basis for damage assessment.
Available data will immediately release payouts to farmers enabling them to restart activity within the cropping season.
“I’m very happy because this is very timely as we are about to buy fertilizer,” Edna Pulanco of Sinangalan village in Malaybalay City said while receiving her payouts from PCIC.
Institutionalizing indexed-based insurance
Although the Wibi Mindanao pilot project has just folded up, its initiatives and innovations introduced will, hopefully, be sustained through House Bill 3560 authored by Yap. He said it “will ensure policy and institutionalize its mechanisms”.
“Side by side with infrastructure spending is the need to flush capital from the formal financing sector to farm production. We are characterized to date by informal lending at stratospheric interest rates unsustainable at a time of climate change,” he said.
“It is the absence of an innovative transfer mechanism for risks which has kept cash releases to victims at a limited sum from the national budget when that amount can be leveraged 10 times over if there is an effective crop insurance in place,” he added.
Yap said agri-insurance system, through strengthened PCIC, will be mandated to do direct and indirect reinsurance and shall be harmonized with an agriculture guarantee fund.
“This bill mandates PCIC and encourage private companies to offer index-based insurance. It will also expand insurance coverage of PCIC to include high-value crops, livestock, aquaculture and fishery products, agroforestry crops and forest plantations,” he said.
“We are now [urging] the Senate to immediately file a counterpart bill to House Bill 3560,” Yap said while urging all stakeholders to help advocate faster passage of his bill. “Many will find this idea abstract or light years away from implementation. Some may think we are still dreaming. However, in an experimental area, thousands of farmers in Mindanao are actually presently enrolled in Wibi,” Yap added.
The Wibi is not a panacea but a promising tool that could play a critical role in transforming vulnerable agriculture into a more resilient and vibrant sector in the midst of uncertain climate through a science-based system.
Image credits: Noel Provido