The report explains why agricultural insurance is expensive to deliver to small farm households. This backdrop coupled with the detailed risk assessment in four provinces leads to a key finding that China should put more resources in developing products that are more suited to an agricultural economy that is dominated by small farm households. In particular, named peril and index-based crop insurance products could be developed for less cost than MPCI products.
The report discusses the important role of government in supporting the legal and regulatory environment, access to data for new product development, risk sharing, and broader education of all stakeholders about the benefits of agricultural insurance. It also explains why this form of subsidy could provide improved incentives versus a direct subsidy for farmer premium.