კონფერენცია

∘ Tengiz Verulava ∘
PROBLEMS OF AGRO INSURANCE IN GEORGIA

Summary

Agriculture is Georgia’s lifeblood. Fifty-three percent of the country’s working population is engaged in agriculture, many working on small plots of one hectare or less.The agriculture sector employs more than half of Georgia’s workforce but accounts for only 10 percent of GDP.Any business includes risks but some risks in agro-business like natural disasters are beyond control and if it happens one can lose everything without insurance.

The role of agro insurance is particularly important in terms of reducing damage caused by the recent natural disaster.Agro insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities. Agricultural risks not only affect farmers, they also affect the wholeagribusiness value chain. Each of the participants along the supplychain, from the suppliers of inputs to the end consumer, are subjectto these risks.The goal of the article is to study and analyze the main tendencies of agro-insurance development in Georgia.

The government of Georgia is working to build a positive culture around agricultural insurance. In September 2014, the Agricultural Projects Management Agency (APMA) rolled out the Agro Insurance Program. By combining financial subsidies with a program to raise awareness, APMA hopes to increase the prevalence of insurance, which should reduce both overall risk and dependence on government bailouts.Farmers are able to purchase insurance against hail, excess rainfall, storms, and autumn frost. The insurance is provided by private companies in partnership with APMA. In 2014, the government covered 94 percent of the tab on every insurance policy sold; farmers were liable for the rest. The program sold 20,952 policies and saw 18,596 hectares of land insured during the first year. However, its very success highlighted a serious problem. Farmers bought insurance largely because it was heavily subsidized.

The main reason for the aggravation of farmers' agro-insurance in Georgia is the distrust of insurance. Insurance companies offer different insurance conditions, which in most cases lead to uncertainty among farmers. Farmers indicating a low level of trust, less awareness about the terms of the insurance contract.In this regard, for the development of agro-insurance in the country, it is necessary to spread awareness about insurance within farmers, increase confidence in the insurance system. The farmers should provide adequate and exhaustive information on the insurance conditions offered by different insurance companies. It will promote competition among insurance companies. Also, it is advisable to initiate establishment of mediation service, which will be able to protect the rights of insurers.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Tengiz Verulava ∘ PROBLEMS OF AGRO INSURANCE IN GEORGIA Summary Agriculture is Georgia’s lifeblood. Fifty-three percent of the country’s working population is engaged in agriculture, many working on small plots of one hectare or less.The agriculture sector employs more than half of Georgia’s workforce but accounts for only 10 percent of GDP.Any business includes risks but some risks in agro-business like natural disasters are beyond control and if it happens one can lose everything without insurance. The role of agro insurance is particularly important in terms of reducing damage caused by the recent natural disaster.Agro insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities. Agricultural risks not only affect farmers, they also affect the wholeagribusiness value chain. Each of the participants along the supplychain, from the suppliers of inputs to the end consumer, are subjectto these risks.The goal of the article is to study and analyze the main tendencies of agro-insurance development in Georgia. The government of Georgia is working to build a positive culture around agricultural insurance. In September 2014, the Agricultural Projects Management Agency (APMA) rolled out the Agro Insurance Program. By combining financial subsidies with a program to raise awareness, APMA hopes to increase the prevalence of insurance, which should reduce both overall risk and dependence on government bailouts.Farmers are able to purchase insurance against hail, excess rainfall, storms, and autumn frost. The insurance is provided by private companies in partnership with APMA. In 2014, the government covered 94 percent of the tab on every insurance policy sold; farmers were liable for the rest. The program sold 20,952 policies and saw 18,596 hectares of land insured during the first year. However, its very success highlighted a serious problem. Farmers bought insurance largely because it was heavily subsidized. The main reason for the aggravation of farmers' agro-insurance in Georgia is the distrust of insurance. Insurance companies offer different insurance conditions, which in most cases lead to uncertainty among farmers. Farmers indicating a low level of trust, less awareness about the terms of the insurance contract.In this regard, for the development of agro-insurance in the country, it is necessary to spread awareness about insurance within farmers, increase confidence in the insurance system. The farmers should provide adequate and exhaustive information on the insurance conditions offered by different insurance companies. It will promote competition among insurance companies. Also, it is advisable to initiate establishment of mediation service, which will be able to protect the rights of insurers.