Auditor General calls for scientific overhaul of agricultural insurance premiums

Kathmandu: The Office of the Auditor General, in its 63rd annual report, has recommended that the government transition toward a more scientific and predictable system for determining agricultural insurance premiums.

Emphasizing the necessity of integrating advanced information technology and robust security measures into the sector, the report highlights that structural improvements are essential to manage the expanding scope of crop and livestock protection.

The audit revealed significant discrepancies between the claims made by insurance providers and the amounts verified by government departments. In one specific case, an insurance company filed claims totalling approximately Rs 4.72 billion across more than seven thousand policies under the national subsidy guidelines.

However, after the Department of Agriculture performed its verification, the approved sum insured was scaled back to Rs 1.88 billion.

This resulted in a massive gap in subsidy payouts; while the company was technically eligible for nearly Rs 100 million based on the 80 percent government subsidy rule, only about Rs 8.8 million was actually disbursed.

The Auditor General has noted that such delays and discrepancies necessitate a more synchronized verification process to ensure that premium documents are audited and settled on time.

The report also underscored the growing fiscal burden on the state as agricultural insurance gains popularity. This year alone, the Department of Livestock Services disbursed over Rs 1.43 billion to the Nepal Insurance Authority for premium subsidies.

With the total sum insured for livestock, fisheries, and poultry reaching nearly Rs 35 billion and total premiums exceeding Rs 1.58 billion, the current premium-to-valuation ratio stands at approximately 4.55 percent.

As the sector continues to grow, the government’s financial liability is set to increase proportionally, leading the Auditor General to conclude that rate-setting mechanisms must be made more transparent and data-driven to ensure long-term fiscal sustainability.