IB plans allow non-life insurers to sell cardamom insurance policiesThe Insurance Board (IB) plans to allow non-life insurance companies to sell cardamom insurance policies in a bid to provide protection to cultivators growing the cash crop, the insurance sector regulator said.
The Insurance Board (IB) plans to allow non-life insurance companies to sell cardamom insurance policies in a bid to provide protection to cultivators growing the cash crop, the insurance sector regulator said.
“We have finalised most of the terms and conditions that should be incorporated in the policy. However, we have not been able to fix the coverage amount,” IB Deputy Director Kundan Sapkota told the Post. “Once we have sorted out this issue, we will allow insurers to sell the policy.”
As per the draft policy, farmers who have planted the crop on at least half a ropani of land or are raising at least 300 plants are eligible to buy cardamom insurance.
The policy will provide coverage for a period of 12 years from the time the crops are planted.
Nepal is the largest producer of large cardamom with a 68 percent share of the international market.
The country exported cardamom worth Rs4.61 billion in the last fiscal year.
Most of the cardamom exported from Nepal is produced in the eastern districts of Dhankuta, Ilam, Panchthar, Taplejung, Sankhuwasabha, Terhathum and Bhojpur. Other districts, such as Lamjung in the west, have also started growing this crop.
“We hope the insurance coverage will encourage more farmers to grow cardamom,” said Sapkota.
According to the IB, farmers wishing to insure their cardamom crops will have to pay a premium equivalent to 5 percent of the coverage amount.
This means that if the coverage amount is, say Rs100, then policyholders will have to pay a fee of Rs5 per year to insure their assets.
Once the premium amount is deposited, losses caused by fire, lightning, earthquake, flood, drought, landslide, cyclonic storm, hailstorm, snow, sleet, other disasters, pest and disease will be fully covered.
“However, these risks will be covered on the basis of input cost,” said Sapkota. This means the premium amount will only cover losses incurred by farmers till the time the crops are ready for harvest. In other words, the insurance policy does not cover their probable income from the sale of their cardamom crops.
Input cost, as per the IB, includes money spent on labour, transportation, irrigation and farm management besides expenditure made while buying fertilisers, pesticides and seedlings. Also, the amount paid as land and irrigation tax, depreciation cost of agricultural equipment and the expenses of repair and maintenance of agricultural equipment have been identified as input cost.
“If policyholders incur losses, they can claim up to 90 percent of these costs (or the sum insured) from the insurance company,” said Sapkota.
The life span of cardamom plants is around 12 years. They generally start bearing fruit two years after planting. The cardamom can be harvested every year for a period of up to 10 years.
“Since lots of inputs are used to keep the plants healthy for 12 years, the coverage amount will keep rising every year. So it will be revised annually, and the premium will also change accordingly,” Sapkota said.
According to the data collected by the IB from government agencies, the input cost of a cardamom crop comes to Rs309,500 per hectare during the first year. This cost goes up by 8 percent per year in the second and third years. After the fourth year, the input cost rises by 20 percent annually, Sapkota said, quoting government figures.
“If we fix the coverage amount based on the input cost provided to us by the government, farmers will be able to make a huge compensation claim which will exert pressure on insurance companies. We are currently trying to find ways to address this issue to create a win-win situation for both farmers and insurance companies,” Sapkota said.