[The Economics of Heatwaves⑩] Pigs and Chickens Collapsing from Heat... Related Insurance Also Rapidly Rising

[Asia Economy Reporter Buaeri Shim Nayoung] #A poultry farm in Cheorwon, Gangwon-do. The chickens were struggling in the heat well above 30 degrees Celsius just before shipment. Chickens and pigs are especially vulnerable to heat because they do not have well-developed sweat glands. The operator here, An Seongjin (63, pseudonym), said, "If they die before shipment after being raised, the damage to the farm is considerable," adding, "We are running several fans and have installed ceiling sprinklers to spray cool water."

As the heatwave intensifies, interest in insurance that can compensate for heatwave damage is increasing. In South Korea, non-life insurance companies offer a 'heatwave' rider for livestock disaster insurance and crop disaster insurance. This year, the heatwave warning started more than ten days earlier than usual, and with the deaths of chickens and pigs continuing, the insurance industry predicts that the livestock disaster insurance subscription rate will approach 90%.

Interest in Livestock and Crop Disaster Insurance Due to Heatwave

According to the Agricultural Policy Insurance Finance Institute on the 30th, as of the end of May, the subscription rate for livestock disaster insurance products in South Korea stands at 85.6%. Out of a total target number of 2,476.2 million heads, 2,120.7 million heads are insured. Especially with the recent intensification of heat, the number of applications and inquiries has surged. The subscription rate at the same time last year was about 81.1%. A representative from the Nonghyup Policy Insurance Finance Institute said, "The subscription rate is rising every year due to concerns about heat and typhoons." In the case of crop disaster insurance, the total premium amount reached 1.0158 trillion won (as of 2020), with the subscription scale increasing annually.

Livestock disaster insurance is offered by NH Nonghyup Insurance, KB Insurance, DB Insurance, Hyundai Marine & Fire Insurance, among others, with 'heatwave' as a special rider. For example, there is a 'heatwave disaster coverage' rider clause that provides compensation in case of damage caused by heatwaves to pigs or chickens. Regarding crop disaster insurance, only NH Nonghyup Insurance offers heatwave damage compensation for ginseng. Due to abnormal weather causing crops to wither or be submerged, preventing proper harvests in various regions, the number of farmers seeking crop disaster insurance has increased. A representative from NH Insurance said, "The subscription rate for crop disaster insurance among farming households cultivating crops is about 50%, and the number of subscribers is increasing every year."

Introduced in the early 2000s, livestock disaster insurance and crop disaster insurance are public-private partnership models involving the Ministry of Agriculture, Food and Rural Affairs and private insurance companies. Insurance companies handle sales and contract maintenance, while the government subsidizes premiums from the national treasury. Most countries, including the United States and Japan, operate agricultural disaster-related insurance under a cooperative model. The United States, which introduced this system early in 1938, initially managed it entirely by the government but switched to a cooperative model in the 1980s to increase subscription rates. South Korea adopted the cooperative model from the start. The U.S. government reportedly spends nearly $9 billion annually on crop insurance subsidies. An official from the Korea Insurance Research Institute explained, "The government cannot fully manage it alone, nor can the private sector alone. In cases of massive disasters where insurance payouts are high, the government supports as a reinsurer because insurance companies would struggle to bear the costs. Most countries have a similar structure."

Japan's Dedicated 'Heatstroke' Insurance

In Japan, which experienced an unprecedented heatwave in June, heatstroke insurance emerged and gained high popularity. According to the Asahi Shimbun, Sumitomo Life Insurance's subsidiary launched a heatstroke-specific insurance product, with applications exceeding 6,000 for three consecutive days. Additionally, Mitsui Sumitomo Insurance added a rider last year covering death, hospitalization, and outpatient treatment due to heatstroke. More than half of new accident insurance contracts for seniors aged 70 and over include the heatstroke rider, showing strong interest. Sompo Japan Insurance also added a heatstroke coverage rider to adult accident insurance starting this year.

In South Korea, non-life insurers do not have a separate heatstroke rider, but some coverage is possible through actual expense insurance. An industry official explained, "If someone contracts a disease due to heatwave and receives medical treatment, that part can be claimed under actual expense insurance, so there is not a significant need for dedicated heatstroke insurance."