Removal of government subsidies on crop insurance to discourage farmers

MANILA, Philippines — The proposal to remove the government’s insurance premium subsidies from the programs of the Philippine Crop Insurance Corp. (PCIC) will discourage farmers from securing crop insurance.

In a statement, the Federation of Free Farmers (FFF) warned that removing government’s premium shares in the PCICs programs would result in higher premiums for farmers and discourage them from securing crop insurance.

Banks, in turn, would find it too risky to lend to uninsured farmers, the FFF said.

“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,”FFF national manager Raul Montemayor said.

Finance Secretary Carlos Dominguez III earlier said the PCIC had been heavily reliant on substantial subsidies from the national government for the past 20 years, as it extended over P23.3 billion in subsidies through the national budget and pumped in an additional P5.3 billion into the PCIC from the Agri-Agra Fund since 2015.

“This trend is not sustainable,” Dominguez said during the first organizational meeting of the reconstituted PCIC Board.

“As directors, we have to ensure that our stakeholders will get the most value for the money from the insurance premium subsidy which the PCIC receives from the national government. We have to utilize each taxpayer’s peso efficiently for the agriculture sector’s benefit,” he said.

Dominguez said running PCIC would require a new business model and the most competent management to ensure that its operations remain sustainable if not totally subsidy-free.

He said the PCIC must be run by insurance industry professionals and guided by the best actuarial advice to be able to address its urgent concerns.

Reacting to the statements of Dominguez, the FFF claimed that the mentioned subsidies were essentially government contributions to the premiums for crop insurance policies issued to farmers.