The insurance regulator, Insurance Regulatory and Development Authority (IRDA) has tightened the norms with regards to the crop insurance scheme.
This has implications for a lot of listed entities as well.
In a nutshell, as high as 20 percent of the total premium, which the general insurance companies collect altogether could come under uncertainty on the back of these new order and regulations from the insurance regulator.
What IRDA has said is that general insurance companies cannot show receivables from crop insurance premium if they are not collected or received within 270 days, which means these general insurance companies will have to mark down whatever remains pending in terms of receivables of crop insurance premium from various central governments and state governments if they are not received within 270 days.
Now, just to set some context, crop insurance is a subsidised government scheme where 50 percent of the premium is paid by the farmer or the beneficiary and the balance 50 percent is shared between the central government and the state government.
Now that 50 percent with central government and state government pays together is the amount that is under question, and which the insurance companies have been asked to collect within 270 days.
Watch the accompanying video of CNBC-TV18’s Yash Jain for more details.