The Ministry of Agriculture of the Republic of Kazakhstan has developed a new law that repealed the inefficient system of compulsory insurance of crops. Instead of this voluntary insurance of agricultural entities was introduced with a whole package of measures of real support to farmers.
As mentioned in the press service of the ministry, the compulsory insurance system was introduced 15 years ago by the special law “On Compulsory Insurance in Crop Production”. It was supposed to help the peasants to compensate for losses in the case of harvest failure, but did not cope with this task.
The compulsory insurance system turned out to be formal – upon the occurrence of an insured event, the received insurance payments did not even cover the minimum production costs of farmers.
Having studied the appeals of farmers, the Ministry of Agriculture has prepared new mechanisms that fundamentally change the approaches of the insurance system in agriculture. These innovations were included in the Law "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Regulation of the AIC", signed by the Head of State on October 28 of this year.
As a result, in January 2020, the Law on Compulsory Insurance in Crop Production will lose its force and a transition will be made from the mandatory form of insurance to voluntary insurance of risks in the field of crop production and animal husbandry.
The new insurance system also provides for specific government support measures for agribusiness entities. For example, instead of the mechanism for subsidizing insurance payments, the Ministry of Agriculture introduced subsidies for the purchase of insurance policies. This will reduce farmers' expenses and make insurance and insurance payments transparent.
The ministry also envisaged a rule that allows farmers to use the insurance policy as additional security when applying for loans at second-tier banks.
It is worth noting that the new voluntary insurance system will work on an electronic platform. The conclusion of insurance contracts, subsidies, determination of the occurrence of an insured event and insurance payment will be made through the information system. This will create a transparent risk management system.