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'Beed Formula' In Crop Insurance Is Gaining Government's Attention

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'Beed formula' is an alternative model in the crop insurance segment to retain the states' participation, which is also known as the 80-110 plan, is now gaining the union government's attention. Additionally, some states have secured refunds of major shares of the gross premiums collectively paid by the union government and the states. Now the insurers have urged the state governments like Uttar Pradesh asking them to adopt the 'Beed formula' for the next year's crop. They have also offered to reduce their guaranteed premium share to 10% from the present 20% - which is the 80-110 plan.

 
'Beed Formula' In Crop Insurance Is Gaining Government's Attention

In the 'Beed formula', the insurer's potential losses are restricted as the insurer would not have to entertain claims above 110% of the gross premium, rather they will refund the premium surplus (gross premium minus claims) exceeding 20% of the gross premium to the state government. On the other hand, the state government will pay for any claims 'above 110% of the premium collected to insulate the insurer from losses'. However, this higher level of claims does not occur often that helps the states to reduce the cost to run the crop insurance scheme.

It will be a win-win formula for both states and insurers as the states will get large-scale premium refunds. For example, in Maharashtra's Beed district, 153% of the premium is paid by the state government in the current Kharif season, while the insurers can get an assured return of 20% of the gross premium.

The union government earlier written to the states to know their understandings regarding the 'Beed formula' as an option under PM Fasal Bima Yojana, although some states were not quite interested in the flagship scheme. Now, the union government has communicated to states like Tamil Nadu and Madhya Pradesh that have adopted the 'Beed formula' and said, "the reimbursements above state share of subsidy will be refunded to the government of India as well" in case claim to premium ratio is very low.

Read more about: crop insurance india
Story first published: Monday, September 6, 2021, 15:26 [IST]
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