Private insurers may help farmers weather the storm

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New Delhi | Published: January 16, 2015 12:12:50 AM

Govt’s invitation to pvt players aimed at creating competition for AIC

In a bid to protect farmers from erratic weather pattern, the government has invited private insurance companies, along with state-owned Agriculture Insurance Company of India (AIC), for providing various products relating to crop, weather and income insurance.

Sources told FE that for the last two decades or so only AIC, which is owned by four state-owned general insurance companies and Nabard, has been offering yield-based and weather-based crop insurance programmes. “Ten private general insurance companies are empanelled for implementation of crop insurance schemes for increasing coverage and create competition in crop insurance sector,” an official with agriculture ministry said.

The key private sector insurance companies, which have started to offer crop or weather insurance products, include ICICI Lombard, HDFC Ergo, Iffco Tokio and Bajaj Allianz. “The private sector would also bring in many innovative insurance products for catering to the need of the farmers in the context of climate change,” the official said.

The official said around 30 million farmers out of 120 million have been covered under the National Agriculture Insurance Scheme (NAIS), which mainly covers yield losses. Sixty five crops and around 25% of the crop areas are covered under crop insurance. About 70% of these are accounted for by farmers who own less than four hectares and a majority of farmers had been provided insurance by AIC.

“Crop insurance is going to become even more important in future, considering increasing climatic variability. Unfortunately, despite insurance reaching almost 30 million farmers today, there is widespread dissatisfaction. We need to develop simple products that are scientifically valid, economically viable, transparent, and acceptable to most stakeholders,” Pramod Aggarwal, regional programme leader, Research Programme on Climate Change, Agriculture and Food Security (CCAFS) platform, said.

Based on evaluation studies, the government had introduced National Crop Insurance Programme (NCIP) after merging Modified National Agricultural Insurance Scheme (MNAIS), Pilot Weather Based Crop Insurance Scheme (WBCIS) & Coconut Palm Insurance Scheme (CPIS) from Rabi 2013-14 season.

The premium paid under NCIP is higher than the NAIS as the premium being charged is on actual basis and claim liability as present is on the insurance company. However, the official said premium under NCIP had been provided with upfront subsidy up to 75% in case of MANIS and up to 50% under WBCIS.

Besides the revamped programme would offer insurance cover to the farmers where historical data on the crops are not necessarily available, thus helping farmers in dealing with the associated risk. However, NAIS would continue for a couple of years before being entirely merged with NCIP which also offering income insurance to the farmers.

NAIS is also available to farmers who have not taken bank loan and covers all food crops — cereals, millets & pulses, oilseeds and some horticultural crops which past yield data is available for adequate number of years. The premium varies between 1.5% to 3.5% of sum insured for food & oilseed crops and a 10% premium subsidy is provided to small & marginal farmers.

The Comprehensive Crop Insurance Scheme (CCIS), introduced in 1985 by the Centre in collaboration with state governments, was linked to short-term crop credit, where all loans for notified crops in a specific area were compulsorily covered.

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