FINANCIAL PERFORMANCE ANALYSIS ON AGRICULTURE INSURANCE COMPANY OF INDIA LIMITED (AIC) - ABSTRACT

FINANCIAL PERFORMANCE ANALYSIS ON
AGRICULTURE INSURANCE COMPANY OF INDIA LIMITED
ABSTRACT
Mr. Karteek Chedadeepu
PGDM - Siva Sivani Institute of Management
Agriculture is the major occupation for the citizen of
India. Nearly 17.4% of GDP is from the agriculture. The rural India depends
majority on agriculture. As of now 60.3% of Indian land is used for agriculture
purpose. The Over all 70 % of population depends on the agriculture. As the
agriculture is dependent on weather conditions and rainfall, the farmers have to
face lot of risks.
The risk could be minimized by using proper
insurance products such as general insurance, life insurance, Agriculture insurance
etc. In India, a specialized organization named AIC deals with agricultural
insurance scheme, the present paper makes an attempt to analyze the progress of
Agriculture Insurance Company of India Limited(AIC).
INTRODUCTION OF AGRICULTURE INSURANCE:
Agriculture Insurance Company of India Limited (AIC) was incorporated under
the Indian Companies Act 1956 on 20th December, 2002. AIC commenced
business from 1st April, 2003. The farmer had to protect from agriculture
variability has been a continuing concern of agriculture policy. According to the
National Agriculture Policy (NAP) 2000, “Despite technological and economic
advancements, the condition of farmers continues to be unstable due to natural
calamities and price fluctuations”. This impact of this variability is highlighted in
drought years with news of farmer suicides in many parts of the country. In India
agriculture insurance is one of the instruments for protecting farmers from
agricultural variability. In India we have different kinds of agriculture insurance
products which includes Crop Insurance, Whether Insurance, National Agriculture
Insurance Scheme, Pradhana Manthri Fasal Bhima Yojana, Varsha Bheema

Yojana etc. This paper focuses on the use of agriculture insurance schemes to
protect farmers from agricultural variability. It requires an investigation so as to
sort out what are the important factors affecting profitability of agriculture
insurance company and this will help concerned bodies to focus on the relevant
factors. Hence the efficient performance of the institutions has become important
and getting insights by different researchers focus on what factors determine the
financial performance of the agriculture insurance company sector. The insurance
premiums for different types of crops are as follows: 3.5 per cent of sum insured
for Bajra and Oilseeds 2.5 per cent of sum insured for Cereals, other Millets and
Pulses Apart from this 50 percent of subsidies in premium are allowed to small
and the marginal farmers.
EVOLUTION OF AGRICULTURE INSURANCE IN INDIA
In year 1915 before independence, J.S. Chakravarthi of Mysore State had
proposed a rain insurance scheme for the farmers. In the year 1962, Govt has
introduced a Crop Insurance Bill and a Model Scheme of Crop Insurance. In
1970, the draft Bill and the Model Scheme were referred to an Expert Committee
headed by Dr. Dharm Narain.
FIRST CROP INSURANCE IN INDIA:
The first crop insurance program was introduced in 1972-73 by the 'General
Insurance' Department of Life Insurance Corporation of India
Iin 19947-1948 where a study on homogeneous areas that deals with a single unit
and individual farmers irrespective of individual crop. The crop insurance was
circulated by central government. In 1971 crop insurance was not introduced
because of financial non variability the chairman of committee dhram decline the
crop insurance in 1976 this was strongly encouraged. This experimental scheme
was based on "Individual Approach". It continued up to 1978-79 and covered only
3110 farmers for a premium of 4.54 lakhs against claims of 37.88 lakh.

Pilot Crop Insurance Scheme (PCIS) – 1979
Proff. Vm dandekar refereed as “father of crop insurance in India” he suggested
“homogeneous area approach” for crop insurance.
General Insurance Corporation of India (GIC) introduced a Pilot Crop Insurance
Scheme (PCIS) from 1979. This scheme covers the cereals, millets, oilseeds,
cotton, potato, gram and barley. This scheme ran till 1984-85 by which 13 States
had participated.
Name Of The Policy Under
Agriculture Insurance
Time Period Rate
Comprehensive crop insurance 1985-1997 Premium fixed 2%
Experimental crop insurance 1997-98
National agriculture insurance scheme 1997-2000 1.5 percent to 3.5 percent
of sum assured for food
crops
Pilot scheme on seed crop insurance 2000
Farm income insurance scheme 2003-04
Pradana manthri fasal bhima yojana 2016
February
2%rabi 2.5% karif
These are comes under the agriculture insurance companies present and
future
Potato crop insurance
Bio fuel/plant insurance
Ply wood tree insurance
Sugar cane insurance
Tea insurance
Pulp wood tree insurance policy
Rubber plantation insurance
Restricted weather based crop insurance
scheme

PERFORMANCE OF AGRICULTURE INSURANCE:
Natural calamities and adverse seasonal conditions are grossly impacted the level
of agriculture productivity. Nearly 65% of Indian agriculture is heavily dependent
on natural factors, particularly rainfall. Crop loss can be reimbursed through
proper weather risk management. Management of weather risk deserves top
priority in the government agenda. Since 1985,when comprehensive crop
insurance scheme was started who replaced by National Agriculture Insurance
Scheme (NAIS) in1999. The NAIS was introduced on a large scale to provide
insurance coverage to farmers against weather risk. State-wise Number and
Percentage of farmers Covered under National Agriculture Insurance in India
(2007-2008). After analyzing the above table, we can say that NAIS has
performed well in the states of Rajasthan, Chhattisgarh, Andhra Pradesh, Gujarat,
Madhya Pradesh, and Orissa. In the states of Assam, Bihar, Goa, Haryana,
Himachal Pradesh, Kerala, Meghalaya, Sikkim, Tripura, Jammu & Kashmir etc.
the numbers of farmers covered are very less in number. So, only a few numbers
of states has taken the benefits from NAIS.
OBJECTIVE OF STUDY:
The main objective of study is to know the financial performance of the
agriculture insurance company. How many farmers were insured, from sum of
amount. And it can know the analysis from the data.
REVIEW OF LITERATURE:
Iftt 2001, analyzed a story of crop insurance, it was started by introducing
comprehensive insurance scheme (CCIS) in 1985. High percentage of claim
premium, high moderate cost, mandatory for Lonee form
Jennifier iftt(2004), It with drawn from crop insurance it support from an income
guarantee scheme or risk management tool, investment tool.
Shina 2004, A study of interstate companies with respect to crop insurance in
india general insurance company manage crop it was delivered through rural
financial institutions. Aic was formed taken over the role of the implementing
agency from GIC.
From analysis it shows an AIC cannot bare risk and gives poor interest in
controlling moral hazards private company will bear all risk.

Kalavakonda and mahul, Studies on the demand for crop insurance good win
1993. Analyze the demand for multiple peril crop insurance of lowa corn
producers by taking 99 lowa countries 1985- 1990
Gowdappa, Sb reddy &Chendra shekar(2012), Farmer perception and
awareness about crop insurance. In Karnataka the study on farmer study rain in
north east part of Karnataka the region receives a very less rain fall compares to
others.
Suresh kumara, Barabh, ranganathan, venkatarama (2011), An Analysis of
farm perception and awareness towards crop insurance as a tool for risk
management. Crop diversification index has also been used to examine the farmers
adjust mechanism against the risk. The survey has revealed the 65%of farmers are
awake of risk mitigation and half of farmers awake of crop insurance.
RESEARCH METHODOLOGY:
Descriptive research methodology is
carried out in this paper. It is mainly based on the secondary data collected from
various sources. We have also used some primary data which is collected by
telephonic talk and interviews of the farmers, entrepreneurs. Different research
articles reports have been reviewed to make this study more relevant

DATA ANALYSIS
Table 1:
Particulars 2009-10 2010-11 2011-2012 2012-13 2013-14 2014-15
Gross Direct
Premium
Growth Rate
82.42% 28.26 32.14 27.96 29.6 -19.30%
Gross Direct
Premium to
Net Worth
Ratio
196.95 173.09 186.60 189.06 1.7 1.28
Net
Retention
Ratio
83.43 65.81 52.67 48.38 50.08 54.62
Net
Commission
Ratio
-3.49 -9,89 -17.43 -13.95% -10.13% -4.56
Expenses of
Management
to Gross
Direct
Premium
Ratio
1.7 2.78 2.38 2.37 2.89 3.70
Combined
Ratio
93.95 75.89 60.48 79.51 98.24 108.55
Underwritin
g Balance
-11.24 32.11 36.8 14.7 0.02 -0.09
Net
Earnings
Ratio
2.63
29.63
37
21.83 14.62 11.23
Available
Solvency
2.07 3.71 3.18 2.47 2.6 3.18

2009-10
2010-2011
2011-12
2012-13
2013-14
2014-15
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
Net Commission
Ratio
Gross Direct Premium Growth Rate
-5
0
5
10
15
20
25
30
35
2009-10
2010-11
2011-2012
2012-13
2013-14
2014-15

2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15
0
10
20
30
40
50
60
70
80
90
Net Retention
Ratio
2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15
0
0.5
1
1.5
2
2.5
3
Expenses of Management to Gross Direct Premium Ratio
1 2 3 4 5 6
0
10
20
30
40
50
60
70
80
90
100
Combined
Ratio
2009-10
2010-2011
2011-12
2012-13
2013-14
2014-15
0
10
20
30
40
50
60
70
80
90
Net Retention
Ratio

2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15
-20
-10
0
10
20
30
40
Underwriting
Balance Ratio
2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15
0
5
10
15
20
25
30
35
40
Net Earnings
Ratio
2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15
0
0.5
1
1.5
2
2.5
3
3.5
4
Available Solvency Margin Ratio to
Required Solvency Margin Ratio*

INTERPRETATION OF THE TABLE:
The gross domestic premium have an increase in the 2011 and there is a Change
in 2015 .the net retention period has slightly decreased year. The net commission
period has slightly decreased and increased in 2015. The combined ratio has
gradually increased. Net earnings ratio has been gradually increased and decreased
slightly. Under write of balance ratio starts with negative. And there is a slight
increased and it came to negative points.
Agricultural Insurance : Current Status
According to agriculture insurance, the current status of the crops
insurance that can be explained in a table in the form of rabi and karif for the
2011-15
Rabi crop insurance for 2011-15
TABLE 2:
Rabi
2010-11
Rabi
2011-
12
Rabi
2012-13
Rabi 2013-
14
year No of
farmers
insured
Sum
insured
No of
farmers
insured
Sum
insured
No of
farmer
s
insured
Sum
insured
No of
farmer
s
insured
Sum
insured
2011-12 16.67 1,128
crore
4.17
lakh
1,128
crore
496787
8
1101055.
6
- -
2012-13 5.97 1,531 cror - - 523929
9
1128393.
6
523929
9
1128393.6
3
2013-14 - - 20.37
crore
283458
crore
613671
3
1570211.
6
614167
7
1571008.0
5
2014-15 -- - - - - - 397358
8
1255204.1

Karif crop insurance for 2010-15
karif
2011
karif
2012
karif
2013
karif
2014
year No of
farmers
insured
Sum
insured
No of
farmers
insured(C
R)
Sum
insured
No of
farmers
insured
Sum
insured
No of
farmers
insured
Sum
insured
2011-12 - - 18.76 2,44,68
0
1155456
1
2348710.
3
- -
2012-13 - - 20.37 283458 1064540
5
2718136.
05
106493
54
2719906
2013-14 - - - - 1032240
1
2979601.
57
974960
0
2900218.
3
2014-15 - - - - - - 968352
9
2438783.
9
Graphical representation:
1,128 crore - 283458 crore
4.17 lakh - 20.37 crore
1,128 crore 1,531 cror -
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
farmers insured
sum
farmers insured
sum
2,44,680
crore.
283458
crore
-
18.76 crore 20.37 crore -
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
farmers insured
2013-2014 sum
2014-15 farmers insured
sum

Interpretation of the Graph:
In 2010-11, no of farmers were insured 16.67 for sum 1,128 crore. In the uear
2011-12. These are the farmers were insured 4.17 lakh, for sum of the 1,128
crore. In the uear 2021-13. These are the farmers were insured 6136713 for sum
of the 11570211.6. In the uear 2014-15. These are the farmers were insured
3973588, for sum of the 1255204.1.
Karrif:
in 2013-14 there is a gradual increase in the table, as compared to al karif seasons
in 2015-15 have a no of farmers were insured, these graph shows there is an
increased in the karif season
CONCLUSION:
We can know the financial performance of the agriculture insurance company, by
this we can know the how many farmers are insured. And the growth of the
company. It explains the less risk to farmers if they were insured.
References:-
1. Agriculture Insurance company of India Limited retrieved from
www.aicofindia.org
2. Insurance Regulatory and Development Authority of India from
www.irdai.gov.in
3. Dandekar V.M.(1985), crop Insurance in India: A Review, Economic and
Political Weekly,
4. Rustogi N.K.(1988) Crop Insurance in India, B.R. Publishing co. Ltd., new
Delhi
5. Sinha Sidharth (2004), Agriculture Insurance in India: Scope for participation
of private
insurers, Economic and Political Weekly, June 19, 2004
6. Government of India(1999) National Agriculture Insurance Scheme, ministry
of Agriculture, New Delhi

FINANCIAL PERFORMANCE ANALYSIS ON AGRICULTURE INSURANCE COMPANY OF INDIA LIMITED (AIC) - ABSTRACT

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FINANCIAL PERFORMANCE ANALYSIS ON AGRICULTURE INSURANCE COMPANY OF INDIA LIMITED (AIC) - ABSTRACT