Agriculture Insurance Company (AIC) has entered a co-insurance agreement with three other public sector general insurance firms—New India Assurance, National Insurance and United India Insurance for Prime Minister Fasal Bima Yojna (PMFBY).
Under the scheme, while AIC will use offices, manpower and rural reach of the three companies, it will offer 12.5 per cent of the premium collected to each of the three companies. This will help AIC reduce overhead cost, and give competitive advantage, said Rajeev Chaudhary, CMD (officiating), AIC.
At present, AIC accounts for nearly 50 per cent of the premium collected under PMFBY. Last year, its total premium collection was about Rs 7000 crore, and this year it expects to reach Rs 14000 crore,
“AIC is a lean organization, but we are very much technically sound in terms of technical expertise and robust database. However, we lack infrastructure. Our cost of management is low, at around 2-3 per cent, whereas for other organizations, the management cost is around 25 per cent. Hence, we will use our expertise in premium collection, claim management and settlement, while using the infrastructure of other companies,” said Chaudhary.
The PMFBY is based on actuarial calculations, and rates are based on risk perception. Thus, premiums differ, based on crops and regions. However, a farmer pays only a flat 2 per cent premium, the rest is provided by the central and state governments. On average, the premium comes to 12-15 per cent, with the state and central governments bearing 5 per cent each.
Over the last few years, technological challenges, especially for crop cutting experiments, have posed discrepancy in claim settlements.
“Technology will and is streamlining PMFBY implementation. Some technological innovations have already been initiated viz., PMFBY portal by the ministry of agriculture, which has eased enrollment under the scheme. Further, crop cutting experiments data is now being captured and transferred through mobile apps. However, there is no robust technological soluation for loss assessment till date, which is acceptable to all stakeholders,” said Chaudhary.