A farmer in the northern province of Vinh Phuc tends to his dairy cows

As 70 percent of the country’s population relies on agriculture for their livelihoods, locals and American experts at a Hanoi conference Thursday said Vietnam needs a reliable agriculture insurance program.

He suggested the use of index-based insurance, which offers assistance based on independent and objective indices such as those of rainfall and temperature.

For example, flood insurance would be paid out when water levels exceed a specified mark and drought insurance would be paid when rainfall drops below a particular level.

The creator of GlobalAgRisk Inc. Jerry Skees first conceptualized index insurance for drought and famine in 2002.

GlobalAgRisk, which co-organized the conference with IPSARD and the Finance Ministry, advises donors and policy makers in developing countries to protect their poor from the consequences of natural disasters.

The US-based consultant is expected to pilot a flood index insurance package worth US$1 million in the Mekong Delta’s Dong Thap Province sometime in the coming weeks.

Jason Hartell from the firm said each affected insurance holder would receive part of the assistance, without explaining further how the division works.

The firm is also considering offering drought index insurance to Central Highlands farmers of Dak Lak Province. The insurance would be applied when farmers receive less rainfall than 20 millimeters between April 15 and June 15.

Suggestions about the index-based insurance came after Hung pointed out that local insurers should not continue with agriculture insurance as they have traditionally, whereby farmers received money when their plants or animals died or contracted disease.

Vietnam’s leading insurer Bao Viet started a rice plant insurance package in 1983 but the program closed in 1999 after the cost of compensation outnumbered the VND13 billion (US$743,500) insurance contributions by VND1.4 billion ($80,070).

Source: TN, VNA