AIC to appoint consultant to rejig biz strategies

With crop insurance turning out to be a market-based product, one of the oldest publicsector insurer, the Agriculture Insurance Company (AIC), is facing a conflict of interest with its promoters — four public sector companies. AIC has floated tenders for appointment of consultants to formulate a new business strategies for itself and reposition itself in the market.

Before the roll out of Pradhan Mantri Fasal Bima Yojna (PMFBY) previous year, AIC was the nodal agency for implementing crop insurance in the country, commanding almost 100 per cent market share.

General Insurance Corporation of India holds 35 per cent stake, National Agriculture Bank for Rural Development holds 30 per cent stake in the company, and four public sector general insurance companies — National Insurance Company, The New India Assurance, The Oriental Insurance Company, and United India Insurance — each of them holds 8.75 per cent in AIC.

Under PMFBY, the four insurance companies too are empanelled to operate crop insurance. They are competing within themselves and AIC, as well as other private sector general insurance companies, to grab a share of the crop insurance market.

Within AIC, questions are being raised on whether there is a need to restructure the ownership of the company.

“It is like father competing with son. There is an urgent need to sort out new role for AIC. Since empanelment in PMFBY is through competitive bidding, it is not apt that the representatives of competing companies gain knowledge of the biding rates by AIC beforehand,” said a government official on condition of anonymity.

This year the total premium collection under the PMFBY is estimated to be around ~25,000 crore, thus making it the third largest sector after motor and health insurance. In the first year of operation itself, the total premium collection under PMFBY was close to ~22,000 crore. Almost all public sector companies expect crop insurance to contribute close to 20 per cent of their premium in the next three to four years. At present, motor and health insurance together account for close to 50 per cent of their premiums.