The working group on risk management in
Concerns:High premium Rates
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| Concerns: High premium Rates: Risk costs for weather insurance are higher, due to extreme variations in weather conditions, year on year. For example, in Rajasthan, every five years, the chances of drought are very high. Hence, insurance companies need to charge risk premium adequately, in order to cover their costs. In the process, if the cost of risk transfer by farmers to insurance companies (through weather insurance, becomes higher than the cost of risk-retention; the potential customers may not find weather insurance an attractive proposition. In order to bring down costs and subsequently for the future success of this product, Government needs to provide as much support, as it has been providing for Crop insurance. Unlike crop insurance, weather insurance needs a reference weather station, which provides weather data to settle claims. Till a year ago, the India Meteorological Department (IMD) was the only agency recording weather data, which could be used to settle claims. Weather parameters such as Rainfall is spatially variable, hence, rainfall at a district level need not necessarily reflect the rainfall in all villages in that district. This is also known as Basis risk. However, now National Collateral Management Services Ltd (NCMSL) has entered into installing automated weather stations at any Taluka level, which considerably reduces basis risk. NCMSL has installed 93 such stations spread across various states. for ICICI Lombard. Download 0.68 Mb. Share with your friends:
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