A research project entitled “Commercial Insurable Risks in Agricultural Sector” released by IRC, is an attempt to answer this question that how Iranian commercial insurance companies can enter into agriculture sector and offer agricultural risk solutions and products, according to PRIAO, IRC.
Based on the findings of this study, high loss ratio in crop insurances has made the private sector more reluctant to enter into this line of business and this has further made the presence of reinsurance solutions a necessity while at the same time, the governmental incentives are vital for the same reason. The most successful method for offering commercial insurance in the agricultural lines is the joint participation of the private and public sectors. This, on the other hand will hold back any low and non-technical insurance rates and possible inefficiency in crop insurances.
The results of the study show that the private sector, due to its lack of knowledge, is required to cooperate with the Agricultural Insurance Fund and it must form a consortium comprised of insurance companies in order to enter into the agricultural business and to be able to receive governmental incentives for the study and investment in this line of business. In the proposed consortium, the focus must be on the index-based insurance and the consortium must be reinsured by Agricultural Insurance Fund in the form of the excess of loss reinsurance scheme. Due to its invaluable experience, familiarity with the underwriting operations and its supervisory stance, Central Insurance of I.R. Iran (Insurance Supervisory and Regulatory Authority) ought to supervise the commercial insurance underwriters covering the agricultural risks.
The study also shows that the insurance companies around the world even in less developed countries are using new technologies to cover agricultural risks. Utilizing digital tools will help reduce loss ratio, loss assessment costs, marketing costs, fraud cases, and will make cheaper crop insurance more accessible and ultimately will increase demands for crop insurances.
The Persian full text of the research project is available at this link.