Farm insurance premium collection jumps 65 percentPremium collection through sales of agriculture-related insurance products jumped 65 percent in the first four months of the current fiscal year, as more people became aware about the importance of insurance coverage and the government continued to extend subsidies to buy policies.
Premium collection through sales of agriculture-related insurance products jumped 65 percent in the first four months of the current fiscal year, as more people became aware about the importance of insurance coverage and the government continued to extend subsidies to buy policies.
Non-life insurance companies sold agricultural insurance products worth Rs119.9 million between mid-July and mid-November, as against Rs72.7 million during the same period a year ago, shows the latest report of the Insurance Board (IB), the regulator of the insurance sector.
Considering the agricultural sector’s contribution to the economy which stands at around 33 percent of the Gross Domestic Product, the amount of premium collection indicates low penetration of farm insurance schemes.
“But year-on-year growth has been very encouraging since the launch of these products in 2013,” said IB Deputy Director Kundan Aryal.
Sales of agriculture-related insurance products have been growing rapidly over the years because the government pays 75 percent of the premium. “Over the years, growing awareness about the importance of these products has also been driving up sales,” Aryal said.
The livestock sector saw the highest growth in sales of agricultural insurance in the first four months of 2016-17 with premium collection surging 62 percent, as per the IB report.
Premium collection through sales of livestock insurance products totalled Rs104.6 million during the review period compared to Rs64.4 million during the same period last year. The livestock sector accounted for 87.2 percent of the total agricultural insurance premium collection.
“Although livestock insurance products are gaining popularity, complaints about policyholders filing fake claims are also on the rise,” Aryal said. “We are looking into this matter.”
Crop insurance is another large contributor to the revenues of non-life insurers selling farm insurance policies. Cultivators spent Rs9.1 million to purchase crop insurance policies in the first four months of the current fiscal year, up 106 percent from the same period a year ago.
Most crop related insurance products available in the market cover risks based on input cost. The input cost, as per the IB, includes money spent on labour, transportation, irrigation and farm management; and expenditure made while buying fertiliser, pesticide and seeds.
Also, the amount paid as land and irrigation tax, depreciation cost of agricultural equipment and cost of repair and maintenance of farm equipment are described as input cost.
Input cost-based agricultural policies only cover losses incurred by cultivators till the time the crops are ready for harvest. Lately, insurance companies have also started selling schemes that cover risks based on anticipated yield.
Two such products available in the market are related to seed crop and spring paddy. “We are planning to introduce more schemes that cover risks based on projected yield if the two products launched recently become successful,” Aryal said.
The availability of a wide range of crop insurance products is expected to benefit growers, pushing up sales of crop insurance policies, which currently account for 7.6 percent of the total agricultural insurance premium collection.
The poultry and fisheries sectors accounted for 3.3 percent and 1.9 percent respectively of the total agricultural insurance premium collection. Sales of poultry insurance policies jumped 40 percent to Rs3.9 million and sales of fisheries insurance schemes surged 121 percent to Rs2.3 million in the first four months of 2016-17, as per IB data.