Agricultural Insurance in Türkiye: Progress & Gaps

Risk, defined as exposure to uncertainty about potential damage, loss, or harm, is an unavoidable element of all economic activity. Insurance emerged as the principal financial tool to reduce these impacts by pooling risks across participants and transferring the burden from individuals to institutions. While this model works across industries, agriculture stands apart in its vulnerability. The sector relies heavily on biological processes, natural cycles, and weather patterns, all of which are inherently uncertain and largely uncontrollable. This dependence makes farming one of the riskiest enterprises, where a single shock can wipe out months or even years of investment and labor.

Because of this complexity, creating a comprehensive insurance system that protects farmers from every possible risk is not realistic. Unlike in manufacturing or services, where hazards can be quantified and isolated, agricultural risks are often interconnected and systemic. Traditional insurance products therefore tend to focus on specific perils that can be clearly defined and measured, such as hailstorms, frost damage, floods, droughts, or fire. These perils are relatively easier to assess, price, and compensate.

Yet, the real challenge lies in the fact that farm-level risks rarely occur in isolation. Drought may weaken crops, making them more susceptible to pests, while market price fluctuations can compound losses already triggered by climatic shocks. This interaction of multiple risk factors stretches beyond the capacity of conventional insurance models, which are not designed to address cascading or systemic failures. For this reason, the conversation around agricultural insurance increasingly emphasizes the need for innovative approaches, such as index-based insurance, public–private partnerships, and state-supported risk-sharing mechanisms. Without such adaptations, traditional insurance alone cannot adequately safeguard farmers against the mounting uncertainties shaping modern agriculture.

The Fundamental Challenge of Agricultural Insurance

The viability of agricultural insurance depends on accurately assessing risks and translating them into affordable premiums. This is straightforward in sectors where risks are discrete and predictable, but agriculture poses a unique challenge. The risks farmers face is diverse, interrelated, and often widespread. A scheme that attempts to cover every potential peril quickly becomes too expensive for the very farmers it aims to protect. Insurance works on the principle of contributing many small sums so that the few who suffer loss can be compensated. Yet in agriculture, disasters like drought, frost, or floods can affect entire regions simultaneously, overwhelming insurers and creating systemic exposure that private markets cannot absorb without government backing.

Insurers attempt to manage this vulnerability through reinsurance, spreading risk across larger pools. However, when claims are frequent or the insurance base is too small, premiums must increase. Higher premiums discourage participation, which shrinks the risk pool further, pushing costs even higher. This creates a cycle where coverage becomes less accessible, farmers remain unprotected, and the insurance market struggles to expand. Breaking this cycle requires broadening participation, diversifying risk, and stabilizing premium levels objectives essential to building trust and ensuring long-term viability.

The Turkish agricultural sector illustrates this dilemma vividly. With its reliance on smallholder farmers operating under tight margins, the sector is deeply exposed to climate shocks, pests, and price volatility. Yet uptake of insurance products remains low. Limited awareness, financial constraints, and skepticism about claim processes discourage participation. Farmers often view premiums as an unaffordable cost rather than a necessary safeguard. When payouts fall short of expectations, trust erodes further. This underinsurance keeps premiums high, reinforcing reliance on post-disaster government aid. While such aid provides immediate relief, it inadvertently discourages investment in proactive risk management, leaving the agricultural economy vulnerable to the next inevitable shock.

Global and Domestic Insurance Context: Latest Trends

The global insurance market is during a gradual but notable transformation. Non-life insurance, which includes agriculture, has been growing faster than life insurance, reflecting rising demand for protection against increasingly volatile risks. In 2023, global insurance premiums expanded by 2.1% in real terms, according to Swiss Re’s Sigma report, showing resilience despite economic headwinds. A key innovation in reshaping agricultural insurance is the adoption of parametric models. Unlike traditional indemnity-based systems, parametric insurance triggers payouts based on measurable indices such as rainfall levels or wind speeds without the delays and disputes tied to field assessments. This approach improves transparency, accelerates payouts, and reduces administrative costs, making it particularly well-suited to agriculture where timeliness can determine recovery.

In Türkiye, agriculture’s exposure to climate shocks, pests, and market volatility made the need for tailored insurance urgent. The creation of the Turkish Agricultural Insurance Pool (TARSIM) in 2005 marked a turning point. As a public-private partnership, TARSIM spreads risk across a national pool, aligns premium setting with government subsidies, and secures international reinsurance, providing stability that individual insurers could not manage alone. The model has produced measurable outcomes. By the end of 2023, agricultural insured value stood at ₺415.2 billion, with over 2.3 million active policies and ₺12.1 billion in premiums collected. A central driver of this progress has been the state’s premium subsidy, which typically covers half of the farmer’s contribution and sometimes more for high-risk regions or products.

Despite progress, structural challenges remain. Coverage is still concentrated in a narrow set of commodities and risks, leaving many farmers underinsured. Expanding into revenue-based and index-linked products is a priority, alongside boosting participation of smallholders. Success will depend on sustained investment in awareness campaigns, training, and smoother claims procedures to build lasting trust in the system.

Conclusion

Agricultural insurance in Türkiye has advanced significantly over the past two decades, yet the system still faces critical gaps that limit its ability to fully protect farmers. The establishment of TARSIM stands out as a landmark reform, enabling wider access, government-backed affordability, and international risk-sharing. Its success in expanding coverage and stabilizing the market demonstrates the value of public–private cooperation. However, the persistence of underinsurance, limited product diversity, and unequal adoption between large and small farms shows that progress has been uneven.

Traditional indemnity-based products cannot alone address the layered and systemic risks inherent in agriculture. Parametric and index-based insurance, along with revenue-linked models, offer promising pathways to enhance transparency, affordability, and timeliness of payouts. Yet technology and product design are only part of the solution. Building trust, particularly among smallholder farmers, is just as important. This requires education, awareness campaigns, and simplified claims procedures that ensure insurance is seen not as a financial burden but as an essential safeguard.

Looking ahead, Türkiye’s agricultural insurance sector will need to blend innovation with inclusivity. If policymakers, insurers, and farmers align around this vision, the system can evolve from a safety net into a cornerstone of agricultural resilience in an era of mounting uncertainty.

References: Swiss Re Institute; TARSIM; Turkish Insurance Association; Öztaş & Karaman; World Bank

Please note that the views expressed in this article are of the author and do not necessarily reflect the views or policies of any organization.

The writer is affiliated with the Department of Agricultural Economics, Selcuk University, Konya-Türkiye and can be reached at mdirek@selcuk.edu.tr

Related Stories