Insurance in crop production — the text of the Law of the Republic of Kazakhstan "On Compulsory Insurance in Crop Production" with amendments and additions as of 07.05.2007.

Download - strahovanie-v-rastineivodstve.doc [241 Kb] (downloads: 38)

Why the law was adopted

Crop production depends on the weather more than other industries. Drought, hail, frost, hot dry winds, downpours, floods and mudflows affect large territories at the same time, and many farms suffer losses at once. The law on compulsory insurance in crop production created a mechanism under which part of such losses is compensated by the insurance system rather than falling entirely on the farmer. Its purpose was to protect the property interests of agricultural producers, preserve funds for farms for the next sowing season and reduce the burden on the budget in the event of mass crop failures.

The law defined the legal, economic and organizational foundations of crop insurance: who is required to insure, which crops and risks are included in insurance protection, how the sum insured and the payment are calculated, and which bodies confirm the fact of an adverse natural phenomenon.

Who the law affects

  • Agricultural producers — peasant and farm households and agricultural enterprises that grow crops subject to insurance.
  • Insurance companies with a licence for the relevant class of insurance — they conclude contracts, assess damage and make payments.
  • Local executive bodies (akimats) — set up commissions that establish the crop areas affected by an adverse natural phenomenon.
  • The hydrometeorological service and emergency authorities — confirm the fact of the natural phenomenon itself.
  • State bodies in the field of agriculture — approve cost standards and take part in regulating the system.

What is insured

The object of insurance is the agricultural producer's property interest connected with the loss or damage of crops. The list of crops included grain crops (wheat, barley, maize, rice, millet, oats and others), oilseeds (soybean, sunflower), cotton and sugar beet.

An insured event is the effect on crops of an adverse natural phenomenon listed in the law: drought, hail, frost and winterkill, hot dry wind, torrential rain and waterlogging, flood, low water and shortage of irrigation water, strong wind, mudflow.

Main obligations of the policyholder

  • conclude an insurance contract within the deadlines established by law;
  • state accurate information about areas, crops and the location of the fields;
  • comply with agrotechnical requirements for its natural and climatic zone;
  • notify the insurer in good time of the occurrence of an adverse natural phenomenon;
  • obtain confirmation of the phenomenon and apply to the akimat to set up a commission within the established deadlines;
  • give the insurer access to the fields for inspection and assessment of damage.

Rights and obligations of the insurer

The insurer is obliged to conclude a contract on the terms of the law, review the application for an insured event, take part in assessing damage and make the payment within the established deadlines. It has the right to verify the information stated in the application form, inspect crops and refuse payment if the loss was caused by reasons that do not constitute an insured event or the policyholder breached its obligations.

How the sum insured and the payment are determined

The sum insured is calculated from the sown area and the standards of direct production costs per hectare, which are set for each region. The payment is made in the amount of the loss but not above the sum insured. In case of total loss of crops, the cost standard for the affected area is taken into account; in case of partial loss, the difference between the cost standard and the value of the crop actually harvested. How crop protection is organized in general is described in the agricultural insurance section.

What matters in practice

  • Deadlines decide everything. For short-term phenomena (hail, downpour, frost) and long-term ones (drought, waterlogging) the law set different deadlines for applying to the akimat. Missing a deadline is a common reason for refusal.
  • Documents — with copies. Certificates on the natural phenomenon and applications to the akimat and the insurer are best copied and kept together with the contract.
  • Agrotechnology. Losses caused by a breach of cultivation technology or by late sowing or harvesting are, as a rule, not recognized as an insured event.
  • Areas. A discrepancy between declared and actual areas leads to disputes when the payment is calculated.

Whether the version is current

The file for download contains a historical version of the law. Kazakhstan's legislation on insurance in agriculture has been changed many times: the list of crops, the procedure for state support and the very principle of compulsoriness were revised. Before relying on the provisions of the law in a contract or a dispute, check against the current version in the "Adilet" information and legal system of normative legal acts (adilet.zan.kz).

Frequently asked questions

Can crops that are not on the list be insured?

Compulsory insurance applied only to the listed crops. Other crops, orchards and greenhouses can be insured voluntarily on terms agreed with the insurer.

What should I do if the insurer has refused payment?

Request a written reasoned refusal and check compliance with the deadlines and the completeness of the documents. The dispute can be settled out of court, through the insurance ombudsman or in court.

The terms found in the law — sum insured, insured event, deductible — are explained in the glossary. If you need to choose crop protection for your farm, you can get a consultation from a broker.