The Hindu Business Line : ICICI Lombard, Nabard to farmers’ rescue

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ICICI Lombard, Nabard to farmers’ rescue

New product to lessen debt burden; launch likely in next kharif season

G.P. Sampath Kumar

Family in distress: A file picture of a farmer from Narayanapura village in Haveri district, Karnataka, describing his brother’s suicide incident following successive years of inadequate rainfall and lack of institutional credit. –

C. Shivkumar

Bangalore, Sept 27

ICICI Lombard General Insurance Company (ILGIC) and Nabard have tied up to design a liability product targeting the debt-hit farmers of Maharashtra and Andhra Pradesh. The product would help the farmers in these regions mitigate their debt burden.

Speaking to Business Line, the ILGIC’s Head - Rural and Agriculture Business group, Mr Pranav Prashad, said, “We intend launching the product from the next kharif (April - October) season.”

risk mitigation

The ILGIC initiative comes close on the heels of Syndicate Bank’s drive to refinance farm loans taken from unorganised money lenders. Mr Prashad said ILGIC risk product would be a risk mitigation product. In the event of crop losses/failures, insurance claims could be used to settle debt liabilities with banks or even money lenders.

In fact, such debts have been one of the major reasons for farmer suicides in both Maharashtra and Andhra Pradesh. Already, the Agricultural Insurance Corporation (AIC) of India and the State Governments offer crop insurance covers at subsidised premiums.

customised

However, the product structured by ILGIC would be specifically customised to meet the requirements of debt high farmers and crop losses would just be one component in the product, he said. ILGIC was one of the first private sector insurers in the country to launch weather risk covers. The weather covers had found phenomenal success in the States where it was launched. These included Punjab, Rajasthan, Chhattisgarh, Andhra Pradesh and Karnataka.

For the last financial year, ILGIC had premium accretions on farm covers was in the excess of Rs 200 crore. Mr Prashad said that the success of the cover could be gauged from the claims ratio that was currently about 110 per cent. But, he added, that since the company also bundled weather covers with rural health covers, it was not making any losses.

He said, “We have a combined claims ratio of 94 per cent.” As a result, the insurer took no losses. Besides, the farm covers were also reinsured. Swiss Re was one of the major re-insurers for its weather/farm covers, he said. This was in addition to the mandatory ceding to the General Insurance Corporation of 20 per cent. So far all the reinsurance support is on a facultative basis. This implied that the reinsurer has the option of accepting or rejecting the risks.

Support

With the reinsurance support and favourable claims experience, ILGIC planned to expand the coverage of its farm/reinsurance cover to 10 per cent of its gross premium accretions. Gross premium underwritten during the last financial year was Rs 3,003.45 crore.

Mr Prashad said that ILGIC was also working with AIC through coinsurance arrangements for rolling out farm insurance products, including weather risk covers by the next rabi (October-March) season. This would be launched in 11 States in the country, covering a range of crops. The business potential is estimated at Rs 250 crore. The coinsurance with AIC, he said, would help improve the domestic retentions and reduce the reliance on external reinsurance.

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