Analysis of the data on the Pradhan Mantri Fasal Bima Yojana (PMFBY) from 2019-20 to 2023-24, reveals significant profit margins for private insurance companies compared to public insurers. The data, disclosed in the Lok Sabha in April 2025, detailing gross premium collected and claims paid by insurance companies, highlight a trend where private insurers are retaining a substantial portion of premium as surplus, indicating better profitability under the scheme.

Across all insurers, the average claims paid as a percentage of premiums received is 67.8 per cent. This means that, on an average, insurers paid out 67.8 per cent of the premiums collected as claims, retaining 32.2 per cent as surplus. The profit of the insurance companies could be lower after accounting for operational costs and administrative expenses. 

Private insurance companies are exhibiting lower claims paid-to-premium ratios compared to public insurers, indicating higher surplus retention. For instance: Royal Sundaram paid out only 27.0 per cent of its ₹809.22 crore premium as claims, retaining 73.0 per cent (₹591.11 crore). Bharti AXA had a claims ratio of 31.8 per cent, retaining 68.2 per cent of its ₹2,286.97 crore premium (₹1,560.82 crore).

While HDFC Ergo, with the highest premium collection among private insurers (₹14,233.32 crore), paid 41 per cent as claims, retaining 59 per cent (₹8,392.75 crore). Other private insurers such as Universal Sompo (46.5 per cent), Future Generali (47.6 per cent) and Kshema General (48.2 per cent) also retained over 50 per cent of their premiums.

In contrast, public sector insurers such as AIC (77.1 per cent), National (103.5 per cent), Oriental (151.9 per cent) and New India (275.3 per cent) paid out significantly higher proportions of their premiums as claims. Notably, National, Oriental and New India paid out more in claims than the premiums they collected, indicating losses or minimal surplus.

The lower claims ratios for private insurers suggest they are more selective in underwriting or operate in regions with lower risk exposure, leading to higher surplus retention.

Contributing factors

Private insurers likely employ stricter underwriting practices, focusing on lower-risk agricultural regions or crops, resulting in fewer claims and higher surplus retention. Private companies may have also streamlined operations and lower administrative costs, allowing them to retain a larger share of premiums as profit.

The data suggests private insurers may operate in areas with lower incidence of crop loss, reducing their claims liability compared to public insurers, which may cover higher-risk regions. Large private insurers such as HDFC Ergo, Reliance General and Bajaj Allianz collect substantial premiums, providing a larger base for surplus retention even with moderate claims ratios.

Govt stand on profit

The Ministry of Agriculture told Rajya Sabha in April,  “ It may be noted that insurance is not an investment. Insurers save premium in good seasons/years and pay high claims, if any, in bad years from the savings made in the good years. Crop insurance is a major risk mitigation tool for the benefit of farmers in event of nonpreventable natural calamities. Insurance is all about spreading the risk spatially and temporally”

Farmer leader Anil Ghanvat has criticized the Pradhan Mantri Fasal Bima Yojana (PMFBY), asserting that it primarily benefits private insurance companies rather than farmers. “We have consistently raised concerns that the insurance scheme is structured and executed to favor private insurers over farmers. The data from the past five years substantiates our position,” he stated.

Published on June 26, 2025