The working group on risk management in
(ix). Recommendations on Improvements
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- (a) Reduction of insurance unit to the village panchayat level for major crops
| 4.2.(ix). Recommendations on Improvements: The Working Group also examined the suggestions made by the Joint Group (constituted by MoA in 2004) and reviewed the feedback. The Working Group after extensive review recommends the following improvements in the product design so as to make crop insurance farmer friendly and meaningful: (a) Reduction of insurance unit to the village panchayat level for major crops: As of now, the National Agricultural Insurance Scheme is implemented on the basis of “homogeneous area approach, and the area (insurance unit) at present is the Taluka / Block or equivalent unit, inmost instances. For the scheme to succeed, the approach would give improved results, provided the yield variability within the area (insurance unit, is the least. However, considering that the present units are largely administrative, yields are hardly uniform within the unit. It is, therefore, felt that the insurance unit should be as small as possible. Ideally, an Individual approach would reflect crop losses on a realistic basis, and this would be most desirable. In Indian conditions, implementing a crop insurance scheme at the individual farm unit level is beset with problems, such as: a) Nonavailability of past record of land surveys, ownership, tenancy and yields at individual farm level b) Large number of farm holdings (nearly 11.6 Crores), with small farm holding sizes c) Remoteness of villages and inaccessibility of farm-holdings d) Large variety of crops, varied agro-climatic conditions and package of practices e) Simultaneous harvesting of crops, allover the country f) Cost and effort required in the collection of a small amount of premium, from a large number of farmers g) Prohibitive administrative costs and inadequate infrastructure The Working Group feels that lowering the Insurance Unit (IU) to Gram Panchayat (GP, is a welcome move, in order to reflect yield losses at a reasonable level. However, data being the lifeblood of insurance, clearly the actuarial rating of the product at GP level, is possible only if the historical yield data at that level (GP) is available, for at least the past 10 years. Since, data at the GP level is not available, with most of the States and for most of the crops, it would be difficult for the insurer, to workout premium rates on sound actuarial principles. The Working Group while supporting the reduction of Insurance Unit (IU), makes the following suggestions vis-à-vis premium rating ( GPs without historical data): (i) While the Insurance Unit (IU) could be lowered to GP, the actuarial premium would be charged based on the yield data of existing unit (tehsil / block / circle etc) and differences in claims, if any, between the existing unit and the GP level (on the basis of the yield estimates consolidated both at GP and existing unit), would be transferred to the Government. This maybe continued, for 3 to 5 years. (ii) Based on the experience of these 3 to 5 years, a correction factor could be worked out, and thereafter actuarial premium could be charged at the GP level, with full claims liability being borne by the insurer. 47 (iii)Alternatively, in order to avoid open-ended liability for the government, in the first 3 to 5 years, a premium fund could be created for residual claims (difference between claims of existing unit and GP, based on a fair estimate and the fund would be maintained by the insurer for the government. The fund would be adjusted finally, at the end of the 3 to 5 year period and the balance settled. Download 0.68 Mb. Share with your friends:
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