The fact is fraud also drives up the cost of insurance for genuine insurance-seekers—small and marginal farmers make up the bulk of the insurance-seekers—and affects business (through reduced attractiveness of higher premiums) for insurers.
Use of drones, satellite imagery and big data to counter insurance fraud in crop and industrial insurance—the Centre and the Insurance Regulatory and Development Authority of India are threshing out a plan to do this, as per Business Standard—is a welcome step. Fraud is estimated to cost insurance companies as much as Rs 45,000 crore; so, even if it is just for industrial and crop insurance, the loss avoided would be nothing to be sneezed at. For perspective, there have been allegations of farmers defrauding insurers to the tune of Rs 58 crore in Maharashtra’s Beed district alone, by making claims of crop failure for a larger area than sown and even for crops not sown; in some cases, the farmer would obtain two crop certificates for two different crops from the authorities and sow only one and claim the insurance for the other. Apart from countering such fraud, drone mapping and satellite imagery can also help reduce delays in settlement of claims, for instance, in case of industrial accidents where ascertaining the origin of accident/problem is difficult to identify.
While these technologies will be integrated on a voluntary basis at the start, the government is looking to make it mandatory going forward. In 2018, the agriculture ministry carried out pilot studies for optimisation of crop-cutting experiments using remote sensing and satellite data, under the Pradhan Mantri Fasal Bima Yojana. The learning from these had aided the roll-out of smart sampling using satellite data in 96 districts of 9 states in 2019. Though pilots of crop area estimation, yield estimation, etc, have also been mounted by deploying drones, artificial intelligence, etc, the government is yet to adopt any specific tech-aided methodology for the flagship farm insurance scheme.
Given the government farm insurance schemes for kharif 2021 cover over 23,600 hectares of cultivable land and 1.5 crore farmers—down from over 2.1 crore farmers in 2018—with a premium of over Rs 16,800 crore and a sum insured of Rs 94,470 crore, the stakes are very high when it comes to fraud. The fact is fraud also drives up the cost of insurance for genuine insurance-seekers—small and marginal farmers make up the bulk of the insurance-seekers—and affects business (through reduced attractiveness of higher premiums) for insurers.
Thus, the deployment of technology that can eliminate fraud, along with Aadhaar seeding as an added layer of protection, can only benefit the crop insurance ecosystem and stimulate demand for the same in the long run. The sooner the government makes drones, satellite imagery, etc, mandatory, the better. Bear in mind, the credit to GVA ratio for the farm sector has shot up to 60% FY20 from 21% in FY08. While the increased credit penetration in the sector is welcome, the fact that the sector is plagued by uncertainties, from that of pricing to that of the adequacy and timeliness of the monsoons, means increasing leverage of the activity also poses a new avenue of risk—one that could prompt desperate farmers to take desperate measures.
Along with deployment of technology for guarding against insurance fraud and other insurance-related issues, the government needs to move to a direct benefits transfer for most subsidies; this will help the farmer and the farm-sector value-chain in the long run.