The working group on risk management in
Public – Private Participatory Models
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| 4.8.2. Public – Private Participatory Models: Three different models of private partnership could be visualized (1) First is Implementing Agency (IA) model, where IA bears no risk, earns no return and is merely reimbursed its administrative expenses. Such a model provides poor incentives for extending coverage and monitoring and controlling moral hazard and adverse selection. (2) Second is a model where the private insurer bears all the risk. Given the significant component of systemic risk in agriculture, such a model will require international reinsurance to be sustainable. The premium for such insurance is likely to be high, requiring subsidy from the government. Under this model, the government through a technical body works out commercial premium rates and offers upfront subsidy in premium to all insurers, who would be required to write policies. The farmer pays premium, less the subsidy. There is a level playing field for all insurers. Another modification in this model could be allocating territories to insurers who would be exclusively writing policies in specified territories. (3) Third is in between the two models discussed above with possibility of public-private sharing of risks. In this case, the government is likely to beat informational disadvantage, vis-à-vis the insurance companies which write the policies. Hence, the risk sharing agreement will have to be appropriately designed to reduce problems of moral hazard and adverse selection. The agreement will also have to provide adequate measures to counteract the natural incentive of private insurers, to target larger farmers and pay less attention to small and marginal farmers. Download 0.68 Mb. Share with your friends:
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