Policy-Sponsored Agriculture Insurance: Welfare Effect And Supply Efficiency

Policy-sponsored agricultural insurance(hereinafter referred to as "agriculture insurance") is a significant institutional arrangement to transfer the risk of agriculture, guarantee the farmers’ income, and make the rural economy prosperous. As a crucial measure of the central government to strengthen and benefit agriculture and an important starting point for "three rural"( issues of agriculture, famers and rural area) work, agricultural insurance needs to shoulder the historic task of decentralized agricultural risks, increase farmers’ income and revitalize the rural economy. Since 2004, with the sustained attention of the NO.1 Document of the central government and the strong support of national finance, agriculture insurance has been showing a continuous high growth momentum. The premium income climbed from 377 million yuan in 2004 to 30.66 billion yuan in 2013, and the proportion from 0.35% to 4.94%. However, too much attention has been paid to the quantity increase instead of the running efficiency in the process of agricultural insurance development,which has been criticized. To this end, our study will conduct a comprehensive in-depth analysis on the running efficiency of agricultural insurance. On the one hand, by studying the welfare effect in the development of agricultural insurance, we can analyze its macro efficiency; On the other hand, through the analysis of the market supply of agricultural insurance business institutions, we can fully understand the microscopic operation efficiency of the agricultural insurance.Concretely speaking, the research content of this article is as follows:(1) the welfare effect of agricultural insurance. The welfare effect of agriculture insurance is mainly reflected in diversifying agricultural risk so as to ensure and increase farmers’ income. Hence, we first need to figure out how agricultural insurance puts effects on farmers’ income from theoretical level. On the one hand, we should clarify the reasons why some farmers do not buy insurance; on the other hand, we should study how their production behavior changes after they buy the insurance, how their household income will be affected, and whether the subsidies of insurance will generate benefits dissipation effect. After that, based on the 2007-2012 provincial panel data, by controlling the relevant factors such as education level, investment level, material capital, scientific and technological level, policy support and others, we empirically analyze the influence of agricultural insurance on farmers household operating income in order to assess the welfare effects of agricultural insurance more accurately.(2) The supply efficiency of agricultural insurance. First of all(at first), we analyze the operating efficiency of China’s agricultural insurance institutions by constructing evaluation index system on the basis of the SE-SBM model. In sample selection process, we take into account the differences between specialized insurance agencies and comprehensive insurance agencies, as well as the differences between China-funded insurance institutions and foreign-funded insurance institutions. Then, we use the Tobit regression to further explore the main factors affecting the operating efficiency. And we also add some factors related to agricultural insurance, including the management duration of agricultural insurance, the proportion of agricultural insurance income and others, to understand influence of insurance agencies’ running of agricultural insurance business on their running effects. Thus, we can comprehensively understand the supply efficiency of agricultural insurance.