PMFBY back in favour as insurers return to do business

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With many steps taken in the past few months infusing technology and reducing the risks of the crop insurance business, ICICI Lombard, Tata AIG, Cholamandalam, and returned Oriental Insurance this year. All four of these insurers had gone out of crop insurance business four years earlier, citing unworkable claims.

Besides, newcomer Kshema General Insurance has also been selected and is bidding for Kharif 2023 in Madhya Pradesh, said a senior official of the Ministry of Agriculture.

In 2019-20 (the fall and spring seasons), these private insurers opted out of PMFasal Bima Yojana Pilot Scheme (PMFBY) Due to high percentages of claims in the states they operated in the previous year, which resulted in losses from the business. However, they have continued to be fanatical in the past four years.

Also read: The Center launched DigiClaim to settle crop insurance claims faster

Official sources said Shriram General Insurance, another private insurer that pulled out of the crop insurance business from 2019-20, and Royal Sundaram, which did not participate in the bids as of 2020, had not shown interest in this year’s bid.

Crop damages in Maharashtra, Andhra Pradesh, Haryana and Chhattisgarh in 2018-19 pushed farmers’ claims against premiums collected by insurance companies to more than 100 per cent, while the claim ratio was 75.4 on an India basis.

Sources said Oriental Insurance, which resigned last year, also returned in 2023 with its participation in the bidding process in Maharashtra. Tata AIG and ICICI Lombard participated in bids in Maharashtra as well. The sources added that Cholamandalam was said to have performed in Uttarakhand and Karnataka.

Under PMFBY, which was launched in 2016, farmers pay 1.5 percent of the sum insured for spring crops and 2 percent for fall crops while it is 5 percent for cash crops. The actual premium is derived through a bidding process from insurance companies each year and any amount in excess of what the farmers pay is subsidized by the government, which is shared between the center and the states on a 50:50 basis. The official said that the less participation of insurance companies leads to an increase in insurance premiums and an increase in the subsidy burden on the government.

Also read: The government is planning “free insurance” for cows, 100% subsidy on premium probably

In FY23, of the total premiums collected by the insurers under PMFBY of Rs.28,666 crore, the share of farmers was only Rs.3,891 crore (or 13.6 per cent).

“Although the government has limited insurance premiums to 25 percent and 30 percent based on irrigation facilities on cultivated land, it is still high compared to what farmers pay as their share. Only the infusion of technology can make it possible,” the senior official said. It achieves transparency and reduces risks, which we rely heavily on.”

The government is set to unveil a raft of steps this week to make PMFBY the tech guru, sources said, and those include a raft of data — yield, rainfall, temperature, and humidity — from farmers’ fields.