PMFBY a boon for general insurers

New Delhi: General insurers have minted money in the last two years out of the government’s flagship scheme — Pradhan Mantri Fasal Bima Yojana (PMFBY), which has proved be a boon for the insurers and a bane for the farmers having additional burden of premium. Over the last 2 years, about 10 general insurance firms in the country, including the state-owned Agriculture Insurance Company (AIC), have accumulated a sum of over Rs 16,000 crore from farmers across India who ended up paying premiums to them for insuring their crops.

Revealing the fact while replying to an RTI query, the agriculture ministry said about 10 private insurance companies have earned Rs 15,795 crore in premium over a two-year period ending March 2018. AIC, the only state-owned insurance firm in the list, claimed the lion’s share. In the year 2016-17, AIC earned a premium of Rs 7,984.56 crore by insuring crops of 246,83,612 farmers in 21 states. 

The RTI, filed by Jalandhar-based activist PP Kapoor, showed that insurance companies earned huge profits of Rs 1,862.32 crore alone in Madhya Pradesh in 2016-17 when they had insured over 71.81 lakh farmers. The following year, over 2.90 lakh fewer farmers insured their crops and profits of these companies plummeted to just Rs 39.21 crore.

According to the agriculture ministry data, out of total Rs 17, 992 crore of estimated claims, Rs 16,827 crore corresponds to 10 kharif crops in which Rs 16,084 crore has been approved and Rs 15,572 crore has been paid.

“In Maharashtra, only about 1 crore farmers were insured in 2017-18 and yet the insurers made a profit of Rs 1,617.94 crore. In 2016-17, 1.20 crore farmers were insured and the companies made a profit of Rs 2,424.23 crore in the same state,” the ministry data said.

Similarly, Gujarat was probably the only state where the number of farmers who insured their crops increased during these two years. In 2016-17, the figure was 5.20 lakh but it grew exponentially to over 17.63 lakh the following year. Simultaneously, the profits of the insurers also shot up from Rs 40.07 crore in 2016-17 to Rs 2,222.58 crore in 2017-18. Haryana was another state that saw the number of farmers insuring their crops and profits of insurers rising.

In Tamil Nadu too the insurance companies’ profit stood at Rs 1,375 crore in 2017-18 despite decline in the number of farmers.

The data also showed that BJP-ruled Madhya Pradesh witnessed the maximum fall in the number of beneficiaries, registering a decline of 40.47 lakh in 2017-18, followed by Rajasthan which saw reduction of 31.25 beneficiaries. “Maharashtra registered a decline of 19.47 lakh, from 1.09 crore in 2016-17 to 89.53 lakh in 2017-18. Uttar Pradesh came next, where the numbers dipped by 14.69 lakh, from 37.17 lakh to 22.48 lakh, during the time period,” the RTI reply said.

The data also pointed out that the numbers of farmers who had availed the insurance cover stood at 5.7 crore in 2016-17, but came down to 4.9 crore in 2017-18. “Despite the fall in the number of farmers insured and the coverage area, the profit of the insurance companies has not fallen. In 2016-17, these companies paid a compensation of Rs 17,902.47 crore and earned a profit of Rs 6,459.64 crore. In 2017-18, they paid over Rs 2,000 crore less in compensation. This made their profits swell to Rs 9,335.62 crore,” the data said.

The outgo in compensation during 2017-18 stood at just Rs 15,710.25 crore. For 2017-18, as many as 3.73 crore farmers have applied under PMFBY for kharif crops, while 1.52 crore farmers applied for rabi crops.

Officials at the agriculture ministry said the number of farmers declined due to tedious process of settlement of insurance claims by insurance companies. “Claim settlement requires long time for physical verification of insured crop, which could be an important reason that deprived the farmers of the benefits of the scheme,” an official said.

“In most of the cases, insurers don’t investigate losses due to a local calamity and, therefore, don’t pay claims. Another reason for low claim settlement could be delay in states releasing their share of subsidy,” the official added.

As per rules under the PMFBY, farmers need to be paid 12 per cent interest by insurance companies for any delay in settlement of claims beyond two months of the prescribed cut-off date, while states will have to pay 12 per cent interest for the delay in release of their share of premium beyond three months. This penalty provisions came into effect on October 1 and will be applicable for all seasons in the future.