2021 年 59 巻 1 号 p. 1-12
This paper clarifies the characteristics of livestock insurance for dairy farming in Japan and discusses issues that can be improved to make it a better risk management method by comparing it with systems in South Korea and Denmark.
Risks in economic activities can be classified based on a risk map that has axes for evaluating loss intensity and the frequency of occurrence. According to the principles of equal income and expenditure, and that of counter-benefits, insurance is an appropriate risk management method when the risks have high loss intensity and low frequency of occurrence. Under the principles of equalization of income and expenditure, and of individual equivalence, insurance is an appropriate risk management method when the risks have high loss intensity and low frequency of occurrence because subscribers have an upper limit on premium payments.
Insurance in the livestock sector in Japan started before World War II and supported the development of the livestock industry. The insurance only covered livestock fatalities. However, the insurance scheme transformed to fulfill the policy goals of increasing food production and stabilize farm management in rural areas after the war.
After the war dairy farming production continued to expand and simulation analysis revealed that even though large and small dairy farms may have the same accident percentage, large dairy farms have fatal accidents every year. It showed that insurance is appropriate for small dairy farms, but not large ones because the intensity of damage of one fatal accident a year is not as serious for large dairy farms. For large-scale dairy farms in Japan under the current system, insurance is not the best risk management method. However, almost every dairy farmer receives a mutual aid subsidy from the government every year. The amount is almost double the insurance premium they pay. The current livestock mutual aid system is no longer economically sustainable without enormous spending by the government.
Livestock insurance in Denmark is sold by several private companies, and the deductible increases by the number of claims filed. Accidents that are high in frequency but low in severity are not covered by insurance payments, and only fatalities that are high loss intensity and infrequent occurrences are included. Veterinary medical expenses and medications for illness are not covered by insurance. As a result, dairy farmers have to focus on accident prevention.
In South Korea, a private company provides livestock insurance, although there is a state subsidy. For this reason, fatal accidents of a small number of dairy cows, which occur frequently, are covered by insurance like in Japan. There is no subsidy for veterinary medical expenses so medical expenses related to illness are not covered by insurance as in Denmark.
In Denmark, the system only covers risks that should be insured. If we look at livestock mutual relief as a method of risk management for dairy farmers, we should identify risks that are in line with the risk management process, evaluate each risk, and select the appropriate methods to mitigate that risk. Livestock mutual relief targeted at dairy farming should be limited to low frequency, high-intensity accidents like multiple fatalities in a short period of time. Expenses related to the death of one cow should be considered a cost of dairy farming