Business Model of the Largest Agriculture Insurance Company of India

Introduction

AgricultureInsurance Company of India Limited (AIC) is a public sector undertaking headquarteredout of New Delhi, India. It is promoted by General InsuranceCorporation of India (GIC), NABARD and the 4 Public Sector General Insurancecompanies. AIC has taken over the implementation of National AgriculturalInsurance Scheme (NAIS) which until Financial Year 2002 – 03 was implemented byGIC.

Products Offered and Present Scale

AIC currently offers area based and weather based crop insurance programs inalmost 500 districts of India. It covers almost 20 million farmers, making itone of the biggest crop insurers in the world.

Business Modelof AIC 

An overwhelmingmajority of AIC's business is derived from the compulsory nature of cropinsurance at the time of an agricultural loan, as directed by the Government ofIndia.

Underwriting& Claims:

The chain of intermediaries involved inunderwriting and claim settlement are as follows:

Farmer ->Primary Agricultural Credit Society (PACS) -> Bank Branch -> Nodal Bank-> AIC

• A farmer iseither categorized as 'Loanee' (has taken an agricultural loan from aparticipating financial institution) or 'Non-Loanee' (has only bought insurancecover without a loan involved). The farmer may interact with a local PACS inhis area or with a Bank Branch directly.
• A participatingbank may be of three types - (1) Regional Rural Bank (2) Commercial Bank (3)District Central Cooperative Bank (DCCB). One or two bankbranches in each district in India would be designated as a Nodal Bank. Thisbank would interact directly with AIC.
• A consolidated'Declaration' which lists insurance parameters for an entire region isforwarded by the PACS/Bank Branch to the next level until it finally reachesthe Nodal Bank. The Nodal Bank then remits the premium and information to AIC.

At the time ofclaims disbursement, the cycle reverses.

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