Mumbai: Agricultural insurance, which is popularly known as crop insurance, has emerged as the new growth spot for the general insurance industry in recent years. Industry experts are of the view that the growth momentum is likely to continue during next year with around 20% rise in premium collections.
“Motor, retail health and crop insurance are the three segments driving growth for the Indian general insurance industry in recent years. With government push to increase coverage, crop insurance is likely to witness 15-20% rise in premium collections in 2018,” secretary general of General Insurance Council, an umbrella body for general insurance companies, R Chandrasekaran told the Finapolis.
After the launch of Pradhan Mantri Fasal Bima Yojana (PMFBY) crop insurance scheme by the government in 2016, agricultural insurance has received a major boost in the country. Cropped area under the insurance cover had increased to 5.62 crore hectares in 2016-17 from 4.26 crore hectares in 2014-15.
However, only 30% of the total cropped area of the country was covered by any kind of crop insurance by the end of last financial year, indicating a huge scope for future growth. The government aims to bring around 50% of the crop area under PMFBY by 2019.
“As more farmers come under the organized lending system, penetration of crop insurance will rise. Currently, many farmers borrow from local money lenders for farming related expenses. So, they are not able to get the benefits of crop insurance schemes,” Chandrasekaran said. Notably, any crop loan disbursed by a financial institution makes it mandatory for the farmer to be included under a government-sponsored a crop insurance scheme.
On the profitability from agricultural insurance segment, Chandrasekaran said that insurance companies hadn’t benefitted much from this segment. “This segment is relatively new in the general insurance space. So, the correct premium for a particular risk is yet to be ascertained by the actuaries. However, competitive pressure has pulled down premium significantly, making it unsustainable from a long-term perspective,” he added.
As per information available with the Insurance Regulatory and Development Authority of India (IRDA), while total premium collections under the crop insurance schemes stood at Rs 22,437 crore in 2016-17, risk cover was 8-9 times of the total premium value. “On an average 70-75% of the premium is reinsured with reinsurance companies,” Chandrasekaran said adding that reinsurance in crop insurance segment will grow in coming years.