Irdai wants public sector general insurers in crop insurance scheme

The state-owned insurers have about 300,000 agents that sell insurance products in rural and urban areas

Insurance Regulatory and Development Authority of India (IRDAI) will take up the matter of non-inclusion of public general insurance companies in the Pradhan Mantri Fasal Bima Yojana. At present, they are not part of the scheme.

Nilesh Sathe, Member-Life, IRDAI said that they will take up the issue with the government. These state-owned insurers have about 300,000 agents that sell insurance products in rural and urban areas.

G Srinivasan, chairman and managing director of New India Assurance said that the scheme will be successful only if they are made part of the scheme. "Our branch network and people on ground are very high. This can make a big difference to the scheme in rural areas. We are hopeful that we would be made part of the scheme," he added. Public sector non-life insurers have more than 9,000 offices across the country.

The government is planning to spend Rs 5,500 crore for the crop insurance scheme that was announced earlier. In his budget speech finance minister Arun Jaitley said that the farmers will pay a nominal premium for the coverage.

The Pradhan Mantri Fasal Bima Yojana has been approved by the cabinet in January. Here, there will be a uniform premium of 2 per cent to be paid by farmers for all Kharif crops and 1.5 per cent for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5 per cent. The balance premium will be paid by the government.

Here, there is no upper limit on government subsidy and even if balance premium is 90 per cent, it will be borne by the government. Insurance executives said that the Modified National Agricultural Insurance Scheme (MNAIS) had high premium rate due to which farmers could not afford it. It is anticipated that there would be clusters that would be formed of districts to implement the scheme. Senior insurance officials said that that how the clusters are classified will define how the premiums will be fixed.

Apart from this, Regional Rural Banks also raised the issue of providing coverage to crop damage due to attacks by wild animals. Several cases of crop damage have been reported due to attacks on the farm land by elephants, which have destroyed the crops. However, ministry officials said that they will look into this issue.

The use of technology has been mandated in the PM Crop Insurance Scheme unlike the other schemes prior to this. The idea was to have one scheme that had the best features of all previous schemes incorporated into it, with weakness removed.

PMFBY will have actuarial yield-based scheme with provision for upfront premium subsidy to be released to insurers. The sum insured will be same for both loanee and non-loanee farmers. Also, there would be no capping and there will be full claim amount paid against the sum insured. This scheme will also cover localised risks like inundation and post harvest losses.