 "Govt to use technology to drive universal insurance schemes")
The government plans to use the expanded template of the revised crop insurance scheme to make its other insurance offer, the Rashtriya Swasthya Bima Yojana (RSBY), tech-driven.
The universal health cover programme is under review to reduce its premium requirement and wider coverage. Because of its high loss ratio, public sector insurance companies have been unable to procure reinsurance coverage.
The performance of the Pradhan Mantri Fasal Bima Yojana, which the government has described as 'a path-breaking scheme for farmers' welfare', is expected to provide guidance on how high-tech content can make a difference. The promise of technology in measuring losses more accurately is the reason why the government has decided to lower the risk of lowering the premium to two per cent of the total value of the crop to be paid by farmers for all kharif crops and 1.5 per cent for all rabi crops. This is also why the government has decided to push for its universal adoption by bringing all commercial and horticultural crops under the cover. The balance premium without any cap will be borne by the states and the Centre. The technological input is expected to keep the tab under control, an officer from the insurance regulator, Insurance Regulatory Authority of India, said.
"The companies have been given a larger (national) canvas to draw on," said K N Rao, chief risk officer of International Reinsurance and Insurance Consultancy & Broking Services, Mumbai. But, they need to assure genuine farmers that the level of documentation will be minimal.
The larger canvas will also make possible the schemes a larger premium earnings for the insurance companies. Reinsurance companies had so far shied away from crop insurance because of adverse claim ratio just as they have for RSBY. The lack of reinsurance cover has, in turn, limited the ability of insurance companies to sell crop insurance to farmers.
The crop insurance scheme and RSBY are part of four insurance covers conceptualised by the government instead of the insurance regulator. The individual contracts are to be decided upon by the states and the public or private sector insurance following an open tender. The other two are the Prime Minister's Jeevan Jyoti Yojana and Jeevan Suraksha Yojana. Since the total premiums are sizable, companies have bid aggressively for them but made up by cutting down on claims.
At the heart of the government's offer of crop insurance to farmers is a simple product to compensate for their losses when the crops fail. The assessment of the price of the crop will be determined at national or at state levels instead of being computed manually at the district offices.
For instance, one of the problems in the existing crop insurance schemes is that companies need a declaration from farmers that they intend to sow a particular crop and show evidence that they have a stake in the farm - either as tenant or as owners. But, the process of certifying those documents from district offices makes smaller farmers avoid taking out the insurance. Frauds are not uncommon in this sector. According to Rao, this can be cut down by taking digital photos of the farmers with the land he has sown on the mobiles.
Jeetu Nayyer, chief of Amicus Brokers and a former officer of one of the government-run general insurance companies, said the crop insurance cover is near universal coverage. "It needs the government to push the product through non-banking channels. Since there is a fear of high loss, insurance companies restrict it to only those farmers who take out a loan from the banks."
A release issued after the meeting of the Cabinet to decide on crop insurance also acknowledged the critical role technology will need to play to make the scheme work. "The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments."
Rajeev Chaudhary, chief risk officer at government-owned Agricultural Insurance Company of India, said while he did not expect satellite imaging to do away with crop-cutting to establish losses, larger use of digital data will do away with the role of patwaris and junior district-level officials to use their discretion to figure out the extent of cropping and to measure the extent of the loss.
Eleven general insurance companies, including Agricultural Insurance Company of India, are expected to bid for the market which generated a premium of about Rs 5,000 crore in FY15. The market could double in a year, said both Chaudhary and Rao.
The official at the insurance regulator cited above said states must insist on high technology content when they negotiate the premium rates with these companies. Otherwise, the insurance companies will try to minimise their liability by limiting their losses as has happened with the weather insurance cover, which has been a non-starter. The official added they would encourage the states to make the loss assessments at the village level. "When companies deal with the insured, often the small farmers are unable to negotiate. This makes for a lot of rejection of claims."
