The development is expected to provide some relief to individuals and firms engaged in agriculture business, while paving way for banks and financial institutions to channel more funds into the agriculture sector, which has virtually remained neglected.[break]
“We have already prepared a draft of the directive that will soon be forwarded to insurance companies,” Binod Aryal, executive director of the Insurance Board, told Republica. “Once it comes into effect, none of the non-life insurers can deny to sell insurance policies on crops, livestock and poultry.”
As per the draft of the directive, these policies can be purchased from any non-life insurance companies by paying an annual premium equivalent to five percent of the sum assured, except in case of commercial poultry, for which an annual premium equivalent to seven percent of the sum assured has to be paid. This means, if the worth of the produce that is being insured is fixed at Rs 100,000, a premium of Rs 5,000 and Rs 7,000 has to be paid per year, respectively.
Once the premium amount is paid, insurance companies will provide cover to all types of livestock, excluding horse, chicken and ducks. Premium payment also ensures coverage for all types of crops, vegetables and fruits, so far restricted to orange and junar (a type of citrus fruit).
However, insurance policies for crops, vegetables and fruits will only provide coverage to cost incurred during plantation phase and not harvests as expected by many. So even in case of loss of harvests, compensation will be extended solely based on factors such as cost involved in purchase of seeds and fertilizers, and labor charge.
“Although this mechanism does not ensure full proof to farmers, who are prone to losing their harvests due to adverse weather conditions or natural disasters, we hope the initiative will encourage banks and financial institutions to extend credit to farmers as loans that are obtained to begin plantation will not be at risk,” Aryal said.
But unlike crops, vegetables and fruits insurance, livestock insurance policies come with more liberal terms and conditions, as compensations are extended in case of death of animals and even in case their yields decline.
“For instance, if a cow that was generating 20 liters of milk per day suddenly starts giving 10 liters, insurance companies should provide compensation on the lost amount of milk as well,” Aryal said.
However, this condition will not apply on animals of every age.
As per the draft of the directive, cows and buffalos over eight years old, and calves less than six months old and over three years old will not qualify for livestock insurance. Similarly, ox and water buffalo less than three years old and over seven years old, while sheep, goats and swine less than three months old and past the age, when their commercial value start diminishing, will not qualify for insurance.
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