Crop insurance. PMFBY back in favour as insurers return to do business

Insurance firms such as ICICI Lombard, Tata AIG, Cholamandalam, and Oriental Insurance have returned to offer cover under PM Fasal Bima Yojana(PMFBY) this year. All these four insurance companies had quit crop insurance business four years ago, citing unviable claims amount. These companies have opted to return as several steps have been taken in the last few months. These include infusing technology and reducing crop insurance business risk.<EP>

Besides, a new entrant, Kshema General Insurance, has also been empanelled and is bidding for Kharif 2023 in Madhya Pradesh, said a senior official in Agriculture Ministry.

In 2019-20 (both kharif and rabi seasons), these private insurance companies had opted out of the flagship PM Fasal Bima Yojana scheme due to high claims ratios in the States where they operated in the previous year, leading to losses from the business. However, they continued with the empanelment in last four years.

Also read: Centre launches DigiClaim for quicker settlement of crop insurance claims

Shriram General Insurance, another private insurer who had withdrawn from the crop insurance segment from 2019-20 and Royal Sundaram, who has not been participating in bids from 2020, have not shown interest in this year’s bidding, official sources said.

Rising claim ratio

Crop damages in Maharashtra, Andhra Pradesh, Haryana, and Chhattisgarh in 2018-19 had pushed farmers’ claims against the premium collected by the insurance companies to over 100 per cent, whereas the claim ratio was 75.4 on all India basis.

Oriental Insurance, who quit last year, has also returned in 2023 with its participation in the bidding process in Maharashtra, the sources said. Both Tata AIG and ICICI Lombard have participated in bids in Maharashtra, too. Cholamandalam is said to have bid in Uttarakhand and Karnataka, the sources added.

Under PMFBY, launched in 2016, farmers pay a fixed 1.5 per cent of the sum insured for rabi crops and 2 per cent for kharif while it is 5 per cent for cash crops. The actual premium is derived through a process of bids from insurers every year and any amount above what farmers pay is subsidised by the government, which is shared between the Centre and States on a 50:50 basis. Lesser participation of insurers leads to higher premiums and also increased subsidy burden for the government, the official said.

Also read: Govt plans ‘free insurance’ for cows, 100% subsidy on premium likely

In FY23, out of ₹28,666 crore gross premium collected by insurance companies under PMFBY, the farmers’ share was only ₹3,891 crore (or 13.6 per cent).

Making it tech-savvy

“Though the government has capped premiums at 25 per cent and 30 per cent based on irrigation facilities in the cultivated land, still they are high compared to what farmers pay as their share. Only the technology infusion can bring in transparency and reduce risk, which we are adopting in a big way,” the senior official said.

The government is scheduled to unveil a host of steps this week to make PMFBY tech-savvy and those include a collection of data-yield, rainfall, temperature, and humidity – from farmers’ fields, sources said.

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