Crop insurance scheme falters as farmers pay high premium

The existing crop insurance scheme remains unsuccessful as it is being implemented in only six states because farmers are forced to pay a higher premium and get a very small amount of claim due to capping of the sum insured, a senior Agriculture Ministry official said.
The Modified National Agricultural Insurance Scheme (MNAIS) is being implemented since 2013-14 rabi season in Andhra Pradesh, Rajasthan, Uttar Pradesh, Uttarakhand, Goa and Kerala.
Under MNAIS, premium rates to be paid by farmers are 2-15 per cent while the actuarial premium is up to 57 per cent depending on high-risk crops and areas.
"In MNAIS, premium rates have been capped and if the actuarial premium rate is higher than the capped rate, the sum insured would get reduced in the same proportion. This would lead to lower payments in the case of calamity in spite of higher premium rates," the official said.

For example, the actuarial premium of paddy in Lalitpur district of Uttar Pradesh was 22 per cent for Kharif 2014 and sum insured per hectare was Rs 30,000. Since premium was capped at 11 per cent under MNAIS, the sum insured accordingly was reduced to Rs 15,000, he said.
The official further said a farmer would have paid a premium of Rs 825 for the reduced sum insured of Rs 15,000. For the crop loss of 70 per cent, he would have got a maximum claim of Rs 10,500 instead of Rs 21,000.

In Bhilwara district in Rajasthan, the actuarial premium for sesame seed was 42.34 per cent in Kharif 2014 and sum insured per hectare was Rs 27,000. Due to capping, the sum insured came down to Rs 7,015 and accordingly, the claim amount also got reduced to Rs 4,910 from Rs 18,900.

"Since actuarial premium rates are high for more risky areas and having high variability in yield, the sum insured also gets reduced proportionately due to capping system and therefore, farmers in these districts do not get the full benefit of crop insurance," the official explained.
That apart, there is a huge difference in the premium rates for different crops in adjacent districts since tendering is done at the district level, he said.
Farmers find it difficult to know the premium rate they have to pay due to variation in rates from one district to another, he added.
Stating that there is a huge delay in settlement of the claims under MNAIS, the official said there is a time lag in providing yield data from crop cutting experiments.

Although the insurance urea area for crop cutting experiments has been reduced to the village level, many states have expressed inability to do this exercise, he said.
Besides MNAIS, the Centre is implementing the National Agricultural Insurance Scheme (NAIS) since 1999 under which premium rates are fixed at 1.5-3.5 per cent for foodgrains and oilseeds crops and actuarial rates for horticultural and cash crops but all claim liability is on the government. NAIS is being implemented in 14 states.
In 2014-15, the insurance coverage was for only 23 per cent of the total gross area of 194 million hectares.