Thursday, August 22, 2019

The Strange Business of Subsidized Yak Insurance

Originally posted in October 2017, an odd corner of the insurance business.

If there was a euro/renminbi to be made, the Dutch re/insurers would already be on it:
...the herverzekering crowd in Amsterdam, they're tough bastards.*
But they aren't, so this reads a bit like Death of a Salesman, Tibet-style.

From Pacific Standard:
On the northeast corner of the Tibetan Plateau, in central China's Gansu Province, nomads can buy insurance policies for their sheep and yaks. The Chinese government subsidizes the plans, and on highways cutting across Gannan, a Tibetan prefecture in Gansu, billboards advertising the insurance programs share the roadside with signs promoting family planning. Behind the billboards lie vast expanses of grassland—rolling canvases of deep green that stretch into oblivion—where sheep and yaks graze, as if Chinese Communist Party officials have placed them there for a photo shoot.
In Langmusi, a small monastery town, I found a local insurance administrator in a café, slumped over a table and mumbling to himself. He stared vacantly at four empty beer cans and then spotted me across the room.

"Meiguo pengyou! Lai!" "American friend! Come!" The day was young—1 p.m. on a Thursday—and I asked why he'd already begun drinking.

"I took a day off today. There's nothing to do."

"My job has no meaning."

"Business isn't good?"

"It's bad," he said. "This insurance thing, it doesn't have any meaning." He looked into his beer glass, sniffled, and shook his head.

I offered, optimistically, that insurance could help a lot of people. There were lots of nomadic shepherds in Tibet—wasn't there demand? He shook his head again.

"Nobody buys the insurance. Nomads don't understand insurance."

This statement perfectly encapsulated the Chinese government's struggle in Tibet. Since the 1950s, when the CCP first occupied Tibet, assimilation by force had brought little beyond resentment. After decades of failure, the Party had begun to try a new strategy; instead of coercing Tibetans for their loyalty, it would try to buy it. The Chinese government invested in infrastructure, provided generous subsidies and tax incentives across various industries, and attempted to bring modern finance—like insurance—to the Plateau. The economic strategy has, so far, been far more successful than the military one, but it is an ongoing project, and one with limits.

"They just don't understand this stuff," he said again, referring to the nomads.
He explained the pricing. The payoffs, he said, were far too low.

"It doesn't matter anyway. No one buys the insurance. The job doesn't mean anything."

As the afternoon wore on, his depression grew more personal. Middle-aged and far from his home village, he worried about his aging parents. At one point, he began to sob, imagining them dying alone while he failed to sell yak and sheep insurance.

Later, at dinner, he ate slowly, the way a sick person does when he's not hungry, and then sauntered out of the café. I expected his exit would mark the last time I ever discussed yak insurance with anyone....MORE
*Last seen in "For Our Dutch Insurance/Reinsurance Readers: Live-blog of the 2011 Berkshire-Hathaway Annual Meeting (BRK.B; BRK.A)".