Hearty Welcome to Hon’ble Agriculture Minister and other Dignitaries

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Hearty Welcome to Hon’ble Agriculture Minister and other Dignitaries by Agriculture Insurance Company of India Limited New Delhi.

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Hearty Welcome to Hon’ble Agriculture Minister and other Dignitaries. by Agriculture Insurance Company of India Limited New Delhi. “ Encouraging Pulses Growers through Innovative Crop Insurance Products”. at National Food Security Mission Meeting on 5 th December 2012 New Delhi. - PowerPoint PPT Presentation

Transcript of Hearty Welcome to Hon’ble Agriculture Minister and other Dignitaries

Page 1: Hearty Welcome to Hon’ble Agriculture Minister  and other Dignitaries

Hearty Welcome to Hon’ble Agriculture Minister and other Dignitaries

by

Agriculture Insurance Company of India LimitedNew Delhi.

Page 2: Hearty Welcome to Hon’ble Agriculture Minister  and other Dignitaries
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Date of Incorporation : 20th December, 2002Commencement of Business: 1st April, 2003

Premium during 2003-04: Rs. 369 crorePremium for the year 2011-12: Rs. 2577 croreGrowth during the 9 years period: 7 times

Share Holders GIC Re - 35 % NABARD - 30 % National, New India, Oriental, United India Insurance - 8.75 % each

AIC’s Profile

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PERFORMANCE OF AIC: 2011-12

SchemeFarmers (in lakh)

Hectares (in lakh)

Sum Insured (Rs. In crore)

Premium (Rs. In

crore)

NAIS 168 234 34768 1087

WBCIS 84 114 15020 1400

MNAIS 11 12 2691 257

TOTAL 263 360 52479 2577

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PULSES INSURANCE PENETRATION (3 YEARS)

Year

Area cultivated under pulses

Black gram

Green gram

Bengal gram

Red gram Others

Total Area Insured

% coverage

2011-12 111.60 5.20 9.73 23.55 4.86 5.05 48.39 43%2010-11 111.60 4.75 8.54 19.09 5.08 4.68 42.14 38%2009-10 111.60 5.57 9.62 12.95 7.28 5.38 40.80 37%

.

Area insured ( lakh Ha)

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PARTICIPATION BEHAVIOR OF FARMERS• Insurance, by nature, involves spatial and temporal

spread of risk, wherein losses paid to farmers in an area are made good by farmers of other areas, and also losses paid during bad years are made good by normal years.

Typically, in crop insurance, the participation of cultivators availing insurance on voluntary basis has thrown-up an important problem challenging the very nature and foundation of insurance concept.

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PARTICIPATION BEHAVIOR OF FARMERS A few studies conducted have confirmed that cultivators

are less enthusiastic to avail crop insurance if there is no pay-out during the previous crop season.

In other words, every ‘claim-free season’ throws-up a challenge of participation in the next season. Problem gets compounded if the cultivator doesn’t receive a pay-out in the initial two or three years.

AIC proposes to run a pilot as part of NFSM in a few States for a few pulse crops to incentivize crop insurance through ‘loyalty discount’.

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Pulses Insurance Pulses Insurance with Loyalty with Loyalty

Bonus – Bonus – FinancialsFinancials

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LOYALTY BONUS LINKED INSURANCE: MODALITIES

Assume the SI for redgram (arhar) is Rs. 10,000 / ha, and premium rate is 10% (as perWBCIS), the gross premium works out to Rs. 1,000 / ha, of which the farmer pays Rs. 250 (@2.5% of SI, balance Rs. 750/- is equally shared by the GoI and the State.

AIC by way of minimizing the administrative expenses and commitment, shall keep aside 5% of the gross premium, i.e. Rs. 50/- out of Rs. 1,000/- as ‘loyalty bonus’.

The insurance cover costing Rs. 1,000 is made available for non-loanee farmers at Rs. 950/-, and the balance Rs. 50/- collected shall be treated as ‘loyalty bonus’, and is kept aside on behalf of the farmer.

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LOYALTY BONUS LINKED CROP INSURANCE: MODALITIES

NFSM shall provide ‘double’ the amount as contribution to the ‘Loyalty Bonus’, meaning for every Rs. 50/- premium from the farmer, NFSM contributes Rs. 100/-

Assuming a farmer can avail insurance under the pilot for a maximum of 2 ha, and paid a premium of Rs. 500/-, shall have Rs. 300/- kept aside each year by AIC on his behalf

Assuming the farmer participates for five years continuously insuring 2 ha every year, an amount of Rs. 1,500/- is kept aside in lieu of ‘loyalty bonus’, + the investment income generated

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LOYALTY BONUS LINKED CROP INSURANCE: MODALITIES.

Going by the current market rates, it may be approx. Rs. 2250/-. The farmer gets this amount at the end of 5th year, in addition to the claims as may be payable depending on the weather deviations, provided he avails crop insurance continuously for 5 years.

AIC shall submit MIS to the NFSM the details of participation and amount of loyalty bonus for each of the insured farmer. AIC shall also submit a report on the investment income earned on the ‘loyalty bonus’, at the end of each year.

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LOYALTY BONUS LINKED CROP INSURANCE: MODALITIES

The pilot areas shall be chosen in consultation with the NFSM for carrying out the pilot for five years, and availability of good density of weather stations / rain gauges shall also be kept in mind while selecting the pilot area(s).

A customized weather insurance product can also be developed by AIC in consultation with NFSM for the purpose.

To further incentivize a few key value-added services like (i) personal accident insurance of Rs.50,000/- (ii) and a village-specific weather forecast, can also be provided, the costs of which can be paid by NFSM.

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ExampleAssume a farmer participates in the scheme continuously for 5 yrs insuring his crop under either Kharif/Rabi or both the seasons every year, as follows. 5% of the total premium inclusive of Govt Subsidy will be kept aside as loyalty discount as below.

Year Area & Crop Farmer Share of Premium

Gross Prem incl Subsidy

Loyalty Portion to be

kept aside

Probable Investment

income *2012 Kharif 2 Ha Maize RF 500 2000 100 402012 Rabi 1 Ha Bengalgram RF 240 960 48 192013 Kharif 2 Ha Ragi RF 500 2000 100 32

2014 Kharif 1.5 Ha Tur RF 450 1800 90 222015 Kharif 2 Ha Maize RF 500 2000 100 16

2015 Rabi 1 Ha Wheat RF 150 800 40 6.5

2016 Kharif 2 Ha Blackgram RF 400 1600 80 6.5Total 2524 11160 558 142Total Loyalty Disc at the end of 5 yrs 700

(Amt in Rs)

* Investment returns considered at 8 % approx.(Real experience may differ as per market trend) 

As per above example the farmers who pays Rs.2524/- as premium shall get around Rs.700/- as loyalty discount in addition to regular eligible claims. In other words farmer pays around 1824 as premium to insure his crops for a period of 5 years.

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LOYALTY BONUS LINKED CROP INSURANCE: FINANCIALS

1 States: Red gram (Arhar) 12 Dists MH -4, MP -4, UP - 4Black gram (Urad) 14 Dists AP-4, KK -2, MH-4, UP - 4

2 Season: Kharif 2013 - 2015

3 Insurance Schemes: Weather Index and Area yield Insurance (NAIS & MNAIS)

4 Premium Rate: 2.5% of Sum Insured5 Average SI (Rs./Hect.): 7500 (Urad) 10000 (Arhar)

Risk Prem. Savings Prem.6 Premium 188 (Urad) 150 38

(Rs/Hect.): 250 (Arhar) 200 50

7 Savings Component Farmer's part Govt. part Total(Rs. / Hect) Urad 38 76 114

Arhar 50 100 150

Years--> 2013 2014 20158 Expected Insured Acreage Urad 500000 700000 1000000

(Hect.) Arhar 400000 500000 650000Total

9 Govt.'s Financial Liability Urad 380.00 532.00 760.00 1672.00(Rs. Lakhs) Arhar 400.00 500.00 650.00 1550.00

Total 780.00 1032.00 1410.00 3222.00

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Non availability of past record of Yields, Land surveys, Ownership and Tenancy

Large number of Farm-holdings (nearly 120 million) Small size of farm-holdings (Average size of 1.2

hectare) Remoteness & inaccessibility of Farm-holdings Low value per unit Large variety of crops, varied agro-climatic

conditions and package of practices Difficulty in collection of small amount of premium

from large number of farmers Simultaneous harvesting of crops all over the country Prohibitive cost of Manpower and Infrastructure

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NATIONAL AGRICULTURAL INSURANCE SCHEME [NAIS](GOVERNMENT’S FLAGSHIP YIELD INDEX CROP INSURANCE PROGRAM) Introduced in 1999 and presently in operation countrywide

Homogenous Area approach and Area-Yield Guarantee

Available to all Farmers - compulsory for borrowing & optional for non-

borrowing

Covers Food crops, Oilseeds & Annual Commercial / Horticultural Crops

Indemnity levels vary from 60% to 90% of past average yield

Sum Insured - Loan amount to 150% of value of Yield

Premium rates

Food crops & Oilseeds – ranges from 1.5% to 3.5%

Annual Commercial / Horticultural Crops – Actuarial

Indemnities exceeding Premium for food crops & oilseeds are borne by

the Government

Being Implemented in 25 States & 2 Union Territories

Covers more than 35 different crops each during Kharif and Rabi

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WEATHER INDEX CROP INSURANCEWEATHER INDEX CROP INSURANCE• Government providing support since 2007

• Indemnifies farmers against deemed crop losses due to adverse weather

incidence

• Crops covered include perennial & horticulture crops like mango, apple,

cashew, grapes & orange

• Risk based Premium rates with upfront premium subsidy from

government

• Payouts based on pre-defined triggers on specified weather parameters

Weather Parameters• Rainfall: Deficit rainfall, Excess rainfall, Consecutive Dry/ Wet Days ,

Number of rainy days

• Temperature: Maximum Temperature (heat), Minimum Temperature (frost), Mean temperature, daily chilling units

• Relative Humidity

• Wind : Speed

• Disease proxy: Combination of rainfall, temperature & humidity

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PILOT ON MODIFIED NAIS Premium rates actuarial, supported by up-front subsidy in

premium & Insurer responsible for the claim liabilities Insurance unit for major crops is ‘village panchayat’ or any

other equivalent unit In case of prevented / failed sowing, claims upto 25% of the

sum insured is payable, and insurance cover ceases thereafter

Post harvest losses caused by cyclonic rains are assessed at farm level for the crop harvested and left in ‘cut & spread’ condition

Individual farm level assessment of losses to be done in case of localized calamities, like hailstorm and landslide

On-account payment up to 25% of likely claim will be released as advance, for providing immediate relief to farmers in case of severe calamities

Threshold yield will be based on average yield of past seven years, excluding upto two years of declared natural calamities

Coverage levels are 70%, 80% & 90% corresponding to high risk, medium risk & low risk crops / areas

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Thank you