Page 33 - Insurance Times September 2021

WHY CROP

INSURANCE IS

BOTH

OBNOXIOUS AND

INDISPENSABLE?

R isk and uncertainties are common in agriculture instances of fraud in Gujarat, Rajasthan and claims loss ratio

is higher than 120%. PMFBY was launched in 2016 and
due to the very characteristic of agriculture i.e.,
dependence on nature. The Pradhan Mantri
contributed to a 32% growth in the non-life insurance sector
Fasal Bima Yogana (PMFBY), a government
sponsored crop insurance scheme, is expected to run into a in 2017. Since then, this class of business has lost its luster
because of losses. The problem of small farmer livelihood is
cool reception from insurers after the national reinsurer GIC aggravated due to the fact that small farmers suffer from
Re decided not to reinsure more than 45% of any insurer's many production risks like drought, flood, lack of adequate
crop insurance business. This in effect would mean insurers use of inputs, poor extension leading to large yield gaps, lack
would have to bear the risk of crop failure due to drought of assured and adequate irrigation, crop failure and so on.
or heavy rains. Two major insurers, New India Assurance and
ICICI Lombard, have decided not to provide crop coverage The production risk coverage which was being attempted
this year. through crop insurance has not worked well and now has
been made voluntary for farmers which would further
This decision is also because of the removal of the reduce the insured area from already inadequate coverage
compulsory clause by the government, leading insurers to of 30%. There are number of factors that affect the returns
feel that farmers genuinely in need of coverage will stay from farming, many of which are beyond the control of
away from the scheme. Insurers say, there have been farmers. Occurrence of drought, flood, untimely rainfall,
hailstorm etc. is only a few among the long list of factors
About the author that affect the returns from farming directly. The increase
in the probability of occurrence of such extreme climatic
Jagendra Kumar events has worsened the status of farmers, who are at the
Ex. CEO, receiving end. The occurrence of such untoward climatic
Pearl Insurance Brokers incidents has become very normal, in recent years, as a
Jaipur consequence of global climate change.

The Insurance Times, September 2021 33