The Agricultural Insurance Industry: A Case Study

Agricultural production in all sectors is inherently a risky business; farmers face a great variety of weather, pest, disease, input supply, and market-related risks resulting in the instability of their income (Hazell, 1992). The prevalence of risk in agriculture is not new and farmers, have, over generations, developed ways of reducing and coping with risk. Crop insurance is a coping mechanism and ex-ante adaptation measure by which risk is transferred from the insured to the insurer. Crop insurance compensates the farmer if there is ultimate crop failure in spite of all the precautionary measures taken by him. In this mechanism, a payment of a certain small amount of premium ensures usually the receipt of a larger amount of compensation

Agricultural insurance is a financial mechanism aiming at minimizing losses caused by the damages from various unknown factors in agricultural sector (Haq et al., 2003). In every insurance contract, there are usually four major issues: the insurance note, the insurance premiums, the insurance subject, and the incident occurrence, which must be utterly defined and explained in the contract context. The assessment of agricultural insurance contracts is a major issue in agricultural budgeting because the appropriate appraisal techniques for the participation of the private sector will pave the way for the insurance industry efficiency and, therefore, will generate effective economic alternatives (Robert, 2005). Thus, agricultural insurance refers to product guarantee operations against risks in maintenance period (from planting to harvest), such as floods, hail, fire, drought, and others. Agricultural insurance covers a broad scope including agriculture, horticulture, livestock, poultry, fishery, bee keeping, and sericulture (Ertiaie and Chizari, 2006). A key question for risk mitigation is whether farmers’ mechanisms of risk management are sufficient or public interventions, such as insurance schemes, can provide a more efficient alternative, given the highly covariate nature of many agricultural risks. Therefore, there

In total, the relatively good performance of monitoring by insurance agents and the experts of Iranian Silkworm Farming Corporation as well as the settlement of insurance claims in a timely manner resulted in growing satisfaction of policy holders so that silkworm insurance was spread to other silk farming regions including Razavi Khorasan, Golestan, and Mazandaran provinces. In 2014-2015 growing season, silkworm insurance covered 7,211 boxes of 12,750 silk egg boxes distributed in Guilan Province, i.e. 57% of the distributed silk eggs were insured. Also, from 8,057 users, 3,047 farmers – i.e. 38% - were covered by silkworm insurance (Insurance Fund for Agricultural Products of Guilan Province, 2015). Silkworm insurance, that has been just recently launched, is a relatively new initiative for fresh cocoon producers. So, understanding factors impacting its adoption by silk farmers and their attitudes towards it can help understanding the challenges of insurance plans and facilitating their implementation and finally, developing silk