The Insurance Regulatory and Development Authority (IRDA) has permitted the seven-month old Agriculture Insurance Company of India (AIC) to settle claims of Rs 2,000 crore to farmers affected by drought in nine states.
The new company, which is promoted by the General Insurance Corporation (GIC), the National Bank for Agriculture and Rural Development (Nabard) and four public sector general insurance companies, will settle crop insurance claims of around 5 million farmers in Andhra Pradesh, Gujarat, Orissa, Karnataka, Madhya Pradesh, Maharashtra, Chhattisgarh, Himachal Pradesh and Tamil Nadu as part of Khariff 2002 risk coverage under the National Agricultural Insurance Scheme.
The company has taken over the scheme from GIC with effect from March 31, 2003. The premium collected for Khariff 2002 is approximately Rs 325 crore.
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"Out of the 22 states and two Union Territories participating in the farm insurance scheme, nine states were identified as drought-affected. We started disbursing the claims in Andhra Pradesh, followed by other states," Suparas Bhandari, chairman and managing director of AIC, said here at a press conference before handing over a cheque for Rs 222.51 crore to the Andhra Pradesh Chief Minister N Chandrababu Naidu.
Bhandari is confident that Rajasthan, Punjab and Haryana, which are not participating in the farm insurance scheme, will also join soon.
"Currently, we are charging a very low rate of premium from farmers for crop insurance which does not exceed 3 per cent of estimated crop value, depending on the crop variety. The claims are being met out of major contributions from respective state governments and the Centre. Our actuarial department has estimated that on an average 9.57 per cent premium will make good the losses incurred on claims," Bhandari said.
The company is planning to launch statewise and cropwise customised insurance products, after it gets sufficient data on crop pattern from the state departments, especially at the panchayat level.
The new products are expected to be launched in the next financial year. Meanwhile, the company will focus on its farm insurance scheme.
"If necessary, we will consider increasing our paid-up capital from the existing Rs 200 crore, before the new products are launched. Our shareholders are willing to increase the paid-up capital up to Rs 750 crore," Bhandari indicated.
GIC and Nabard hold 35 per cent and 30 per cent stake, respectively, in the company's equity, while the four general insurance companies hold 8.75 per cent each.
The company also plans to reinsure its portfolio with the national reinsurer, GIC, before approaching international reinsurers for hedging the risk.