Agricultural Insurance in Pakistan: Protecting Farmers and the Economy
Almost 40% of Pakistan’s workforce is employed in agriculture, accounting for 24% of the nation’s GDP. Yet, various dangers, including natural disasters, pests, illnesses, and market changes, endangering farmers’ livelihoods and the nation’s economy. As a result, the public and private sectors have established programs to aid farmers in coping with losses and making investments in the future. In this post, we will examine the significance, operation, types, advantages, difficulties, and end of agriculture insurance in Pakistan.
The Importance of Agricultural Insurance in Pakistan
A strategy for risk management, agricultural insurance compensates farmers financially if crops or livestock are lost owing to specific risks. The objective is to lessen the volatility and uncertainty that farmers experience so they can bounce back and carry on with their businesses. Other advantages of agricultural insurance for the economy include stabilizing food prices, lowering poverty, encouraging investment, and boosting resistance to climate change.
Natural disasters like floods, droughts, and earthquakes can instantly destroy crops and other assets in Pakistan’s agriculture. The Pakistan Meteorological Service reports that during the past ten years, the nation has witnessed 139 extreme weather events that have cost the economy more than USD 18 billion. In addition, illnesses and pests like locust swarms and avian influenza can decimate livestock and crops, creating food shortages and health dangers. Farmers can reduce these risks with agricultural insurance, preserving their output and income.
How Agricultural Insurance Works in Pakistan?
Both public and private organizations in Pakistan provide agricultural insurance, with the former dominating the market. Since the 1970s, the government has introduced several crop insurance programs, including the Area Yield Index-Based Crop Insurance (AYIBC) scheme and the National Agricultural Insurance System (NAIS), which cover various crops and risks. With premium rates ranging from 2% to 5% of the insured amount, these schemes are run by provincial agriculture ministries and supported by the federal and local governments.
In recent years, private insurers have also entered the agricultural insurance industry, providing increasingly specialized and inventive products, including weather-based insurance, animal insurance, and certain crops. These products evaluate and monitor crop conditions and initiate rewards when losses occur using remote sensing technology, mobile phone apps, and satellite data. Private insurers also work with banks, agricultural companies, and microfinance organizations to offer insurance as a component of packaged services.
Types of Agricultural Insurance Available in Pakistan
Crop insurance, livestock insurance, and index-based insurance are Pakistan’s three primary categories of agricultural insurance pakistan.
Crop insurance protects against losses due to decreased yield or harm from calamities, including floods, droughts, pests, and illnesses. The insurance amount is determined based on the predicted crop value and the sum insured, which might represent 50% to 100% of the deal. The premium prices vary according to the crop type, region, and risk profile, among other things.
Losses resulting from animal mortalities or disabilities brought on by mishaps, illnesses, or theft are covered by livestock insurance. The insurance payout is determined based on the animal’s market value and the sum insured, which can represent 50% to 100% of the deal. The animal species, age, and medical history are only a few variables that affect premium costs.