Mumbai: The government has allowed all the four public sector general insurers to participate in its farm insurance schemes—the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Unified Package Insurance Scheme.
The government had kicked off the schemes with a potential of over $2.5 billion in premium collection on 1 June without involving any of the four public sector general insurers, who control almost 50% of the market.
Only 11 private sector players were allowed to participate, as they have better experience in crop insurance schemes—an area which state-run companies had been almost eschewing so far.
The PMFBY has replaced two existing crop insurance schemes: the National Agricultural Insurance Scheme (NAIS) and the Modified NAIS.
For Kharif crops, the premium charged would be up to 2% of the sum insured; for Rabi crops, the premium will be up to 1.5%.
“We have been allowed to participate in these schemes. Now that Kharif crop season has already begun, we will participate in the Rabi season,” the country’s largest general insurer New India Assurance’s chairman G. Srinivasan told PTI.
National Insurance Company (NIC), another participant in the scheme, said that it is “working with Agricultural Insurance Company (AIC), as they are providing us technical know-how about the subject.”
“I do believe that it will be a profitable venture as it has been priced on the basis of actuarial calculation which will ensure the insurers get the right price for providing cover,” said NIC chairman and managing director Sanath Kumar said.
According to Kumar, the states have already floated tenders for the scheme for Kharif season.
“Still, I do believe that we will be able to participate in the forthcoming Rabi crops,” he said.
However, a central government official said even for Kharif crops, the state-owned general insurers can provide cover in association with AIC.
The state-run non-life insurers have a massive presence in rural and semi-urban areas compared to their private sector counterparts, which will help increase the reach of PMFBY, he said. As of now, AIC is the sole state-run company which has been providing the coverage.
Now, all the four state-owned companies will associate with AIC to provide cover under the schemes. Their participation will also ensure that the scheme benefits both loanee and non-loanee farmers as the premium is quite low.
“We have already crossed the mark of 24-25% of coverage of crop loan and now we are aiming at achieving 40% by the fiscal end,” he said.
SBI General Insurance is looking at doubling its crop insurance cover during the current fiscal.
“We have underwritten premium to the tune of Rs.100 crore in the crop insurance segment in the last fiscal and we are looking at doubling our crop insurance cover during the current fiscal thanks to PMFBY,” SBI General Insurance managing director Pushan Mahapatra said.
Talking about state-run general insurers joining the bandwagon, he said, “More number of players will bring better competition and better risk management practices.”
State-run reinsurer GIC Re plans to become the world’s second largest agriculture reinsurer due to its participation in PMFBY. “Our share as reinsurer in PMFBY is already at 30-40%. But we want to make it to above 50% by March so as to become the world’s second largest reinsurer,” GIC Re chairperson Alice G. Vaidyan said.