A normal monsoon in the Kharif 2016 season has resulted in lower claims under the Centre’s flagship scheme — Pradhan Mantri Fasal Bima Yojana — keeping insurance companies happy.

The provisional figures from Maharashtra, which accounted for a fourth of the total premium collected under the scheme, is testimony to this.

The six clusters (36 districts) in Maharashtra were covered by four insurers — public sector insurer Agriculture Insurance Company (AIC), IFFCO Tokio, Reliance General, and HDFC ERGO.

Data available with Business Line show that while the total premium collected from Maharashtra under the PMFBY in Kharif 2016 was ₹3,920.8 crore, the claims were about ₹2,000 crore, or a tad over 50 per cent of the premiums collected.

An insurer makes good profit when the claim ratio (proportion of claims to the premium) is less than 80 per cent.

Agriculture Insurance Company (AIC) has, however, paid a higher amount to farmers.

The company is in the process of settling claims of ₹1,200 crore — amounting to over 80 per cent of the premium collected by it from the State. But this does not necessarily imply that the clusters covered by AIC faced a relatively higher risk.

When inviting bids from insurance companies for the PMFBY, the government divides the State into different clusters with a mix of low- and high-risk districts.

There is no difference in the risk profile of clusters of different insurers, says an official from the Department of Agriculture, Maharashtra.

Who takes profits?

In crop insurance, every insurer retains 15-25 per cent of the risk and the balance is hived off to re-insurers.

In India, while the government company — GIC — shares about 50 per cent of the risk as a re-insurer in crop insurance policies, the balance is taken up by the private international re-insurers.

This means, a portion of the profit, if any, in crop insurance policies goes to global insurance players.

Farmers’ peeve

But private insurers are not deploying their profits to improve the claim assessment and settlement process, say farmer representatives.

Devinder Sharma, convenor of Kisan Ekta, a large farmers’ union, says, “Crop cutting experiments for loss assessment is not being done properly.

Private insurers have not invested even 1 per cent of what they have collected as premium in human infrastructure. Leave alone using drones as per the original mandate, they are not even employing the required manpower to do it manually…”

Insurers collected a total premium of ₹16,130 crore under the PMFBY in the last Kharif season.