The government has recently decided to create a ‘pool’ for claim settlement under its crop insurance scheme so as to diversify the risks for insurers and to lower the cost of re-insurance.
As per the report, the measure is taken to address the wrong perception that insurers are profiting unduly from the crop insurance scheme.
While it is noticed that insurers re-insure their crop portfolio mainly with foreign companies with nearly 50 percent of the crop re-insurance goes to global players.
As per the decision, the creation of a pool for claim settlement under the Pradhan Mantri Fasal Bima Yojana (PMFBY) will likely redress a situation where a substantial portion of the surplus goes to re-insurers.
As per the proposed pool, insurance companies will keep 25 percent of the premium/risk (as they do now), and hive off the rest to the pool. The pool will be managed by a pool manager/administrator. The government-appointed technical committee will fix Premium rates; moreover, any surplus generated will remain in the pool, and be invested.
It is hoped that such a model will help insurance players diversify their risk, and also lower reduce re-insurance costs.
Countries like Spain and Turkey have successfully implemented the pool model of crop insurance, and it will work well for India, too, say experts. As per reports, insurance regulator IRDAI has to first come up with guidelines and framework.
Recently, some companies in the general insurance space have been suffering loss in their crop insurance portfolio.
