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‘It is unfair to Delay Insurance Payments’

In an interview with BK Jha, Board Member of Agriculture Insurance Company and Professor IIM Bangalore Gopal Naik makes some suggestions to address the crop insurance issues

Gopal Naik
Professor, IIM Bangalore

How can PMFBY be effectively implemented for the benefit of the farmers?

PMFBY requires the following two major facilitation to be undertaken by the government to make insurance effective
A.Updated land records data – land ownership and cultivator data with GIS mapping - readily available electronically which can be accessed at the time of subscription of insurance by farmers. This will help in accessing verifiable data on ownership and crop acreage with the Insurance companies so that subscription by farmers can be made easy and disputes can be reduced and payment can be done quickly. 
B.Agri-extension system which provides information to farmers continuously and collects data periodically within the season so that crop damage can be assessed accurately as and when it happens. This system can guide farmers on crop insurance as well help them subscribe to insurance. This will help reduce hassles during subscription. Also help reduce cost to insurance companies which should reflect in the reduced premium amount. This will also help providing insurance at the individual farmer level.
C.States should pay the premium amount as and when it is finalized. This will help in timely payment to the farmers.

Do you think, there is some inherent flaws in the Scheme with regard to payment system?

The current delay in payment to farmers is mainly due to delay in crop cutting data reaching the insurance companies, time taken to verify, payment by the States to insurance companies. If the suggestions made as above is implemented it will solve not only insurance problems but also other problems such as productivity, sustainability, credit availability and risk management and price realization.

Is it possible to settle claims quickly?
It is unfair to delay insurance payments. Even six months after kharif season 2016 ended the insurance claims settled are less than a quarter of the total claims made. After a crop loss takes place anything beyond a month to receive claims is a long time for farmers to wait. Long time taken in assessment of crop losses, delay in payment of subsidies by state government, deficient IT structure of insurance companies and absence of good agricultural data as the main reasons for delays.

Competition has been created among insurance players. Only low premium cannot help farmers? What are other benefits coming out of competition ?
It will take time for competition to catch up like in the case of telecom. Today we are not complaining about the telecom service charges. Similar competition can happen if the ecosystem is developed as suggested above.Competition created under the PMFBY should over a time address several problems. As I said earlier setting proper data systems on land ownership, crop area data and good crop assessment system will facilitate competition in the market place and bring down the premium rate.

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