Envision re-structuring for better performance

Agricultural Insurance Board:

by Ranga Chandrarathne

Agricultural Insurance Board consists of two sections; the section which provides social security schemes for farmers and fishermen and the one which provides insurance facilities for farmers and farming equipment. The insurance schemes offered by the institute covers agriculture and persons engaged in the industry.

According to the Chairman of the Agricultural Insurance Board (AIB) Mervin Gunasena, AIB has also introduced a health insurance policy for farmers. Currently over 920,000 farmers are enrolled in the farmer pension scheme.

Out of enrolled farmers, 55,000 farmers are currently receiving pensions under the scheme. Farmers work on an informal basis and some of them are part-time farmers though the farming community accounts more than half of the population.

The pension scheme became very popular among farmers. If a 55 year old person joins the pension scheme, he/she receives 96.5 per cent subsidy from the government. He/she has to make an initial payment of Rs. 690 to enroll in the scheme.

This can be paid in full or in two instalments within a year. However, a person is to pay in full and then he/she is entitled to a deduction. When the pension scheme comes into operation, a farmer receives a monthly pension of Rs 1,000. The pension will be paid to the enrolled person till he/she reaches 60. At the end of five years, the interest rate reaches 14 per cent and the monthly pension becomes Rs.8500.

In the event of death of a pension-holder, the spouses will receive the pension until the time that pension-holder would reach the age of 80. However, if the person is alive, he /she is entitled to the pension for life.

AIB will pay the pension for members of the scheme, for at least, twenty years. This pension scheme has expanded to include fishermen and fishermen also receive the same benefits that farmers receive from the scheme.

Although the pension scheme is designed for those between 18-59, there is a trend where farmers are willing to join the scheme when they are older. If a person joins the scheme at 18, he has to pay a sum of Rs.5500 and receives a monthly pension Rs.4120.

This results in putting extra strain on the scheme as the pension-holders pay their premium only for five years. However, if a person joins the scheme at the age of 18, it would be beneficial to the person as well as to the scheme.

In addition to social security schemes, AIB has several insurance schemes covering crops (paddy, maze, coconut, flowers and fruits) as well as farmers. For instance, the AIB's health insurance scheme is popular among farmers.

It is a unique scheme where the farmers have to spend only a 95 cents a day, the annual premium being Rs. 350. The benefits of this health policy include a hospital allowance of Rs. 250 per day with transport from and to the hospital. The health policy offers coverage of Rs. 25,000 per annum as farming is of an informal nature yielding an irregular income.

However, Mervin Gunasena is of the view that farmers still have to realize the range of benefits that the health schemes offer.

In collaboration with the ILO, study for pilot projects in Ampara, have been carried out to add more benefits to the scheme. The MoU would be a thri-party agreement with ILO, AIB and NGO forum in Ampara. The targeted groups of the scheme are farmers and fishermen. On completion of the study, AIB hopes to introduce a new pension scheme with an increased pension.

A special insurance scheme has been introduced to cover agricultural machinery such as tractors. If damage is caused to machinery in the field, an insurance policy covers such damages.

One of the unique insurances schemes that the AIB has introduced was the scheme to cover damages caused to crops by wild elephants. This scheme commenced in collaboration with the Department of Wild Life and Union Assurance.

In addition to a host of benefits the insurance and social security schemes offer, AIB will pay a student aid in the sum of Rs.5000 for an employee's child when he/she passed the scholarship examination.

AIB explores ways and means of protecting farmers from unscrupulous middlemen who used to buy harvest at a nominal fee, by issuing loans by mortgaging the harvest so that the farmers are able to keep the harvest till they get a better deal. Obtaining a reasonable prize for the yield has been an issue, especially in the Polonnaruwa District.

According to Gunasena, AIB is working on a life insurance policy for farmers which is expected to be introduced this December. By the end of next year, AIB hopes to join an international insurance company to provide better facilities for the farming community.

Currently the AIB is in operation in almost all districts except in the Districts of Mullaitivu and Kilinochchi. Plans are afoot to introduce a micro insurance scheme for farmers to cover natural disasters such as flood and landslides. For this, AIB seeks assistance from the World Bank. This will be launched in collaboration of the Disaster Management Centre.

Marvin Gunasena is of the opinion that a study should be done to ascertain the possible areas of expansion in the field of insurance so as to enable AIB to deliver a better service. In this regard, assistance has been sought from the FAO, World Bank and other international NGOs including the Asian Productivity Organisation (APO).

This is necessary as a country analysis has not been done for the past twenty years. AIB will also venture into a micro-credit scheme along with the micro-insurance schemes. Commenting on the present structure of the organisation, Gunasena envisions that the present structure of the AIB should be altered to suit the modern competitive business environment.

One of the stumbling blocks in infusing professionalism into crop insurance is the lack of professionals in this area. the area of loss assessment should be improved with capacity building and introducing latest technology such as GIS mapping and remote sensing.

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