The consequences of crop failure to regional economies are severe, yet the reasons few farmers are insured is a matter of debate.
By Misko Taleski for Southeast European Times in Skopje -- 05/05/12
Even though governments in the region offer subsidies to insure against crop loss, the number of farmers insuring their arable land in the region remains negligibly small and the damages to crops are increasing. This situation prompts a debate about how to protect a sector vital to economic development.
"Damages can be crucial for the economy of a state, especially in those countries in which agricultural production is dominant in the GNP, as is the case with us," Sava Bogicevic, technical director of the Delta Generali insurance company in Serbia, said.
Miroslav Milovanovic argued since there is no systemic approach to address natural calamities, insuring agricultural products is the only alternative.
"Last year, there were only 15 requests to insure various kinds of production [in Republika Srpska in Bosnia and Herzegovina], which is an unbelievably small number, but is understandable because insurance increases the cost of production," Milovanovic said.
Experts estimate an average of 3% of farmers in the region insure their land in an all-or-nothing game with nature. In Serbia, for example, the figure is less than 10%, while by contrast, in EU countries like France and Austria, it is 77% and 90% respectively.
The unusually abundant snow season, subsequent floods, sleet, fire and other calamities this year have caused hundreds of millions of euro in damages. In the Federation of Bosnia and Herzegovina alone, damage to crops was well in excess of 80m euros. "When we add and subtract everything, the number will be much bigger," Dragan Pavlovic, president of the FBiH Villagers Union, said.
Farmers said the main reason for the poor interest in obtaining insurance lies in the insurance companies' unprincipled policy towards their clients.
"We do not insure our crops because we have no money to cover the high fees, and the insurance companies often manipulate us. That is why we put our hope in subsidies, which continually increase. The damages due to climate change also increase from year to year and so do our costs, so any help is welcome," Risto Stefanovski, a farmer with property near Skopje, told SETimes.
The annual insurance fee for a farm worth 50,000 euros in Serbia is over 120 euros, but if the farm is in a region affected by floods, the amount can be five times higher.
Veljo Tantarov, president of the Macedonian Farmers Association, told SETimes that in the socialist system, the insurance companies often wrongly assessed damages and consequently the amounts of liabilities they paid.
"The people lost trust. The situation has barely changed today; the companies again dictate the conditions, and this affects agriculture and the economy at large," Tantarov said.
Consequently, some governments have instituted policies to co-finance farmers' insurance on crops, animal husbandry and drought. In Croatia, the government subsidises 25% of the insurance cost; in BiH 30%; in Serbia 40%.
Marjan Blazhevski stated since the Macedonian agriculture ministry introduced 60% subsidies for agricultural insurance in 2008, the interest in obtaining protection has increased.
"Still, the number of insured is small relative to the number of registered farmers. One of the main reasons is the farmers' inadequate knowledge of the benefits as well as the programme for subsidies to the insurance premiums," Blazhevski said.
Aleksandar Janev argues the fact that in Macedonia only four insurance companies offer agriculture-related insurance suggests their disinterest.
"Neither the 60% subsidies for insurance nor the agriculture ministry's awareness raising campaigns, however, are yielding the expected results. ... Only 1.2% of the total registered farmers insured their crops last year. The net premium is 530,000 euros, of which the government subsidises 320,000 euros," he said.
Macedonian farmers welcome the 60% state support but said it arrives late in the season; they also mistrust the intentions of lower-level officials.
"Insurance companies require attestation that the state will cover 60% of the insurance's total sum, but the agriculture ministry's regional offices still do not issue them. The officials told us the applications we need to fill out will reach them in June. Why would we need insurance in June when we will have finished picking the fruits?" anonymous said.
Danijela Nedeljkovic, director of the Dunav insurance company's small and medium enterprises department, argued another major reason for farmers' lacking insurance is poorly developed agricultural production. When the investment and the yield are small, it is hard to justify insuring the farms.
"By intensifying production with big investments to obtain high yields, the interest in insurance will grow," she said.