Mumbai, Jan 24 (PTI) With the government launching a new corporate insurance scheme from April, the industry hopes that the move is likely to more than double the agriculture insurance business within very first year of implementation of the scheme.
“All the 11 general insurance companies, which offer agri insurance business, have business of around Rs 5,000 crore and it is likely to cross Rs 13,000 crore by the end of the next fiscal year as I expect many new players entering the fray in an aggressive manner,” Agriculture Insurance Company (AIC) chairman and managing director P J Joseph told PTI.
“We are fully geared up to implement the scheme as we know the business very well,” he added.
Already the largest non-life insurer New India Assurance, which is a fringe player in the crop insurance front, has decided to grow the book aggressively.
“We are not much into crop insurance as of now. We have already written to the government requesting it to allow us to become an aggressive player in this area,” New India Assurance chairman and managing director G Srinivasan said.
“The scheme gives flexibility to rate the segment appropriately. Farmer needs to pay a lesser premium due to the large government subsidy,” he added.
Following the drought conditions in many parts of the country and the instances of farmer suicides, Prime Minister Narendra Modi on January 13 announced a new crop insurance, Pradhan Mantri Fasal Bima Yojna (PMFBY), for the harried farmers with a low premium of just 2 per cent of the covered amount.
The scheme will be rolled out from the coming kharif season beginning June and the Centre and the states together will involve an annual outgo of Rs 8,800 crore in terms of subsidy which will be equally shared.
The Centre would incur an expenditure of more than Rs 8,800 crore annually at this rate of subsidy if 50 per cent of the total crop area of 194 million hectare is insured.
Under the new scheme farmers will pay only 2 per cent of the premium fixed by insurance company for kharif grain/ oilseeds crops and 1.5 per cent for rabi foodgrain/oilseeds crops.
The remaining sum of premium would be borne by the Centre and states equally and aimed at covering 50 per cent of the crop area of 194.40 million hectare annually.
Last year, only 27 per cent of the crop area was insured which cost Rs 3,150 crore to the national exchequer.
Tata AIG General Insurance believes the new scheme will help increase the crop insurance penetration up to 50 per cent, from present low 23 per cent penetration, Tata AIG president M Ravichandran said.
SBI General Insurance said the merging of the existing National Agricultural Insurance Scheme (NAIS) into the PMFBY will offer it a further opportunity to offer crop insurance to a larger number of people.
“This will be possible as the area earlier covered under NAIS will be available to all insurance companies,” its newly-appointed managing director and chief executive Pushan Mahapatra said.
Insurers feel that features like use of modern crop insurance technology under the new scheme will make the entire process more transparent.
“Use of drones and smartphones and remote sensing techniques will reduce time for crop cutting experiment and will bring more transparency in loss assessment, Bajaj Allianz General Insurance agri business head Ashish Agarwal said.
Sanjay Datta, head of underwritings and claims at ICICI Lombard, said it is a positive scheme as it talks about risk-based insurance product for crop insurance rather than claim-based subsidy product.
He cited the capping of the farmer’s premium at a meager 2 per cent as the biggest game-changer for the industry as earlier, the premium used to go up, while sum assured came down. “But that will not be the case now on,” he said.
Talking about turnaround time in claim settlement in the new scheme, he said, “it normally takes one or two years in the existing system but it will not be more than a quarter under the new scheme.”