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Hearty Welcome to Honble

Agriculture Minister
and other Dignitaries
by

Agriculture Insurance Company of


India Limited
New Delhi.

AICs Profile
Date of Incorporation :
Commencement of Business:

20th December, 2002


1st April, 2003

Premium during 2003-04:


Rs. 369
crore
Premium for the year 2011-12: Rs. 2577
crore
Growth during the 9 years period: 7 times
Share Holders
GIC Re - 35 %
NABARD - 30 %

PERFORMANCE OF AIC: 2011-12


Hectare
Farmers
s
Scheme (in lakh) (in lakh)

Sum
Premium
Insured
(Rs. In
crore)

(Rs. In
crore)

168

234

34768

1087

WBCIS

84

114

15020

1400

MNAIS

11

12

2691

257

TOTAL

263

360

52479

2577

NAIS

PULSES INSURANCE PENETRATION


(3 YEARS)

PARTICIPATION BEHAVIOR OF
FARMERS
Insurance, by nature, involves spatial and temporal
spread of risk, wherein losses paid to farmers in an
area are made good by farmers of other areas, and also
losses paid during bad years are made good by normal
years.
Typically, in crop insurance, the participation of
cultivators availing insurance on voluntary basis has
thrown-up an important problem challenging the very
nature and foundation of insurance concept.

PARTICIPATION BEHAVIOR OF
FARMERS
A few studies conducted have confirmed that cultivators
are less enthusiastic to avail crop insurance if there is no
pay-out during the previous crop season.
In other words, every claim-free season throws-up a
challenge of participation in the next season. Problem
gets compounded if the cultivator doesnt receive a payout in the initial two or three years.
AIC proposes to run a pilot as part of NFSM in a few
States for a few pulse crops to incentivize crop insurance
through loyalty discount.

Pulses Insurance
with Loyalty
Bonus Financials

LOYALTY BONUS LINKED INSURANCE: MODALITIES

Assume the SI for redgram (arhar) is Rs. 10,000 / ha, and


premium rate is 10% (as perWBCIS), the gross premium works
out to Rs. 1,000 / ha, of which the farmer pays Rs. 250 (@2.5%
of SI, balance Rs. 750/- is equally shared by the GoI and the
State.
AIC by way of minimizing the administrative expenses and
commitment, shall keep aside 5% of the gross premium, i.e. Rs.
50/- out of Rs. 1,000/- as loyalty bonus.
The insurance cover costing Rs. 1,000 is made available for
non-loanee farmers at Rs. 950/-, and the balance Rs. 50/collected shall be treated as loyalty bonus, and is kept aside on
behalf of the farmer.

LOYALTY BONUS LINKED CROP INSURANCE:


MODALITIES

NFSM shall provide double the amount as contribution to


the Loyalty Bonus, meaning for every Rs. 50/- premium
from the farmer, NFSM contributes Rs. 100/ Assuming a farmer can avail insurance under the pilot for a
maximum of 2 ha, and paid a premium of Rs. 500/-, shall
have Rs. 300/- kept aside each year by AIC on his behalf
Assuming the farmer participates for five years
continuously insuring 2 ha every year, an amount of Rs.
1,500/- is kept aside in lieu of loyalty bonus, + the
investment income generated

LOYALTY BONUS LINKED CROP


INSURANCE: MODALITIES.

Going by the current market rates, it may be approx. Rs.


2250/-. The farmer gets this amount at the end of 5th year, in
addition to the claims as may be payable depending on the
weather deviations, provided he avails crop insurance
continuously for 5 years.
AIC shall submit MIS to the NFSM the details of
participation and amount of loyalty bonus for each of the
insured farmer. AIC shall also submit a report on the
investment income earned on the loyalty bonus, at the end
of each year.

LOYALTY BONUS LINKED CROP INSURANCE:


MODALITIES

The pilot areas shall be chosen in consultation with the


NFSM for carrying out the pilot for five years, and
availability of good density of weather stations / rain
gauges shall also be kept in mind while selecting the pilot
area(s).

A customized weather insurance product can also be


developed by AIC in consultation with NFSM for the
purpose.

To further incentivize a few key value-added services like


(i) personal accident insurance of Rs.50,000/- (ii) and a
village-specific weather forecast, can also be provided, the
costs of which can be paid by NFSM.

Example
Assume a farmer participates in the scheme continuously for 5 yrs insuring his crop
under either Kharif/Rabi or both the seasons every year, as follows. 5% of the total
premium inclusive of Govt Subsidy will be kept aside as loyalty discount as below.
(Amt in Rs)

Year

Area & Crop

Farmer
Share of
Premium

Gross
Prem
incl
Subsidy
2000

Loyalty
Probable
Portion to Investme
be kept
nt income
aside
*
100
40

2012
2 Ha Maize RF
500
Kharif
2012
1
Ha
240
960
48
19
Rabi
Bengalgram RF
32
2013
2 Ha Ragi RF
500
2000
100
Kharif
2014
1.5 Ha Tur RF
450
1800
90
22
Kharif
16
2015
2 Ha Maize RF
500
2000
100
* Investment returns considered at 8 % approx.(Real experience may differ as per market trend)
Kharif
2015
1 example
Ha Wheat
RF who pays
150
800 shall get40
As per above
the farmers
Rs.2524/- as premium
around Rs.700/-6.5
as
loyalty discount in addition to regular eligible claims. In other words farmer pays around 1824 as
Rabi
premium to 2
insure
crops for a period of 5
years.
6.5
2016
HahisBlackgram
400
1600
80

LOYALTY BONUS LINKED CROP


INSURANCE: FINANCIALS

Non availability of past record of Yields, Land


surveys, Ownership and Tenancy
Large number of Farm-holdings (nearly 120 million)
Small size of farm-holdings (Average size of 1.2
hectare)
Remoteness & inaccessibility of Farm-holdings
Low value per unit
Large variety of crops, varied agro-climatic
conditions and package of practices
Difficulty in collection of small amount of premium
from large number of farmers
Simultaneous harvesting of crops all over the country
Prohibitive cost of Manpower and Infrastructure

NATIONAL AGRICULTURAL INSURANCE SCHEME


[NAIS]
(GOVERNMENTS FLAGSHIP YIELD INDEX CROP INSURANCE
Introduced in 1999 and presently in operation countrywide
PROGRAM)

Homogenous Area approach and Area-Yield Guarantee

Available to all Farmers - compulsory for borrowing & optional for nonborrowing

Covers Food crops, Oilseeds & Annual Commercial / Horticultural Crops

Indemnity levels vary from 60% to 90% of past average yield

Sum Insured - Loan amount to 150% of value of Yield

Premium rates
Food crops & Oilseeds ranges from 1.5% to 3.5%
Annual Commercial / Horticultural Crops Actuarial

Indemnities exceeding Premium for food crops & oilseeds are borne
by the Government

Being Implemented in 25 States & 2 Union Territories

Covers more than 35 different crops each during Kharif and Rabi

WEATHER INDEX CROP INSURANCE

Government providing support since 2007

Indemnifies farmers against deemed crop losses due to adverse weather


incidence

Crops covered include perennial & horticulture crops like mango, apple,
cashew, grapes & orange

Risk based Premium rates with upfront premium subsidy from government

Payouts based on pre-defined triggers on specified weather parameters

Weather Parameters

Rainfall: Deficit rainfall, Excess rainfall, Consecutive Dry/ Wet Days ,


Number of rainy days

Temperature: Maximum Temperature (heat), Minimum Temperature (frost),


Mean temperature, daily chilling units

Relative Humidity

Wind : Speed

Disease proxy: Combination of rainfall, temperature & humidity

PILOT ON MODIFIED
NAIS
Premium rates actuarial, supported by up-front subsidy in
premium & Insurer responsible for the claim liabilities

Insurance unit for major crops is village panchayat or any


other equivalent unit

In case of prevented / failed sowing, claims upto 25% of the


sum insured is payable, and insurance cover ceases
thereafter

Post harvest losses caused by cyclonic rains are assessed at


farm level for the crop harvested and left in cut & spread
condition

Individual farm level assessment of losses to be done in case


of localized calamities, like hailstorm and landslide

On-account payment up to 25% of likely claim will be


released as advance, for providing immediate relief to
farmers in case of severe calamities

Threshold yield will be based on average yield of past seven


years, excluding upto two years of declared natural
calamities

Coverage levels are 70%, 80% & 90% corresponding to high


risk, medium risk & low risk crops / areas

Thank you

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