The Hindu Business Line : IRDA finds promising market for crop insurance

THE Insurance Regulatory and Development Authority (IRDA) is highly optimistic on the opportunities in the crop insurance segment to be thrown open for both public and private insurers in the near future.

According to the IRDA Chairman, Mr C.S. Rao, though crop insurance has been identified as a critical component of food security, it was not worked out to be an effective, sustainable and comprehensive solution. The fragmented nature of Indian farm holdings, lack of base data and mixed voluntary and compulsory nature of the crop insurance scheme offered till now were some of the reasons for the failure of the scheme.

"There is a perception among many that whatever protection it has provided till now has been more to the financial institutions lending to the farmer rather than to the farmer himself," Mr Rao said in a latest communiqué to the industry players.

According to the IRDA Chairman, "It is also acknowledged that the lack of an actuarial pricing and the subsidy on the premium by the government (the State involved and Centre) have eroded the capacity of the scheme to become commercially sustainable both in terms of being remunerative and professionally administered."

Stating that these constraints prevented product innovation in the crop insurance arena, Mr Rao, however, said there were clear signs that a marked departure in crop insurance was on the anvil. The spinning off of the government's crop insurance initiative into a separate company was the first step in this direction.

Stating that novel products were launched by various insurers in the last three years to cater to the specific requirements of different sections of the population, he said, "We do hope that the same spirit would inspire the industry to come out with appropriate crop insurance packages."

Pointing out that the country has about 11 crore farmers of whom only about 20 per cent avail themselves of crop loans from financial institutions and only half of those were insured, the Chairman and Managing Director of the newly formed Agriculture Insurance Company of India Ltd (AIC), Mr Suparas Bhandari, said in the IRDA communiqué that it was the endeavour of AIC to strike a fine balance between the high risks involved in agriculture and allied activities and the affordability of the farming community.

Informing the industry players that the government has decided to put the National Agriculture Insurance Scheme on an actuarial pedestal from kharif 2004 season onwards, Mr Bhandari said the sum insured was expected to be of the order of Rs 25,000 crore by the end of the tenth five year plan covering over two-crore farmers as against the current level of Rs 11,267 crore of sum insured covering around 1.2 crore farmers.

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