Need for Major Innovations in Agriculture

Transcript:Need for Major Innovations in Agriculture:
Need for Major Innovations in Agriculture Insurance Agriculture is the backbone of Pakistan’s economy Most crops are highly vulnerable to the vagaries of weather This vulnerability is likely to increase due to weather variability and Climate Change Despite this no worthwhile effort has been made in Pakistan to launch innovative Crop insurance schemes Need for Major Innovations in Agriculture Insurance The CLIS in the country protects the loan portfolio of the banks to a certain extent and has many shortcomings The Insurance Industry has a low risk appetite and does not want to venture into new areas Most countries have moved on from conventional crop insurance to innovative crop insurance schemes There is no need for us to re-invent the wheel All that we need to do is review the success stories of other countries and customize them as per our local requirements Why not conventional crop insurance? Half hearted attempts have been made in Pakistan to experiment with Conventional crop insurance which were bound to fail Conventional Crop insurance has been declared a global failure by international experts like Skees, Murdoch etc It can not be successful in developing countries due to bulging populations, budgetary constraints, huge farmlands and political pressures It is a bottomless pit because the claims subsidy is open-ended. It cannot be budgeted by the governments Why not conventional crop insurance? There is a high level of moral hazard The claims settlement is delayed for months hence defeating the very purpose of insurance It is difficult to remove the political pressure Major Advantages of weather Insurance Negligible moral hazard Outside political pressure Low administration cost Transparent structure It is faster It can be budgeted It has proved to be more sustainable and scalable than conventional crop insurance The Indian Experience Indian Experience Three crop insurance schemes are running side by side in India. All of them are compulsory and are bundled with loans: Conventional Crop Insurance (NAIS) Weather Insurance (WBCIS) Modified Crop Insurance (MNAIS) Indian Experience Total premium underwritten in 2014: Weather insurance- Rs 27 billion Modified Insurance- Rs 12 billion Conventional Insurance- Rs 7.8 billion Indian Experience The Year on year growth rate of last 5 years: Weather Insurance : 24% Modified Insurance :14% Conventional Insurance :--5%(Negative Growth) Indian Experience The cumulative 5 years loss ratio of: Weather Insurance: 73% Modified Insurance : 81% Conventional Insurance : 330% Indian Experience The average claim settlement time