The central government’s flagship crop insurance scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY), has attracted less interest from insurers in the wake of losses following a surge in extreme weather events.
Ahead of the 2019-20 crop season, three private companies — ICICI Lombard, Tata AIG and Cholamandalam MS — did not bid for the rabi (winter) and kharif (monsoon) seasons due to heavy losses in the 2018 kharif season, reported Down To Earth, a magazine focused on politics of environment and development. 

The scheme was rolled out during the 2016 kharif season with 10 private insurance companies and one state owned insurer. During rabi 2016-17, five more companies were empanelled, four of which were government-run. This was the season private player Shriram General Insurance exited from the scheme due to losses. In kharif 2017, two more private sector companies joined the scheme taking the total list of empanelled companies to 17. Now, the scheme is left with 14 companies, nine of which are privately-run. 

The data for 2016-17, updated till December 2017, show extreme weather events affected 2.6m ha of cropped area in the country. In 2017-18, updated till December 2018, this nearly doubled to 4.7m ha, according to data released by the Ministry of Statistics and Programme Implementation. 


Mr Rajeev Chaudhary, chairperson and managing director of government-run Agriculture Insurance Company (AICL), says traditionally insurance companies would incur losses during the rabi season, which is associated with freak weather events, and earn profits during the kharif season.

In fact, most of the insurance companies incurred losses in the 2018 kharif season, with nine states — which include Haryana and Maharashtra — recording over 100% claim ratios. In another four states, claim ratios were lower than 100% but higher than the India average of 76%, according to the Ministry of Agriculture and Farmers’ Welfare.

Mr Chaudhary estimates the claims in 2019 kharif season will be the highest ever due to prolonged rainfall in Maharashtra, Karnataka and Madhya Pradesh that damaged key crops. 

The PMFBY scheme also covers farmers in the pre-sowing as well as the post-harvest periods, unlike traditional insurance schemes that cover just standing crops.

“Most farmers now apply for post-harvest losses, and no insurance company has the infrastructure to verify them,” said Mr Chaudhary.


Furthermore, most insurance agents Down to Earth spoke to allege that local politicians and state governments inflate the loss estimation under the crop cutting experiment, which is carried out to ascertain the extent of crop damage.

The number of farmers covered under the PMFBY scheme has not increased over the years. In 2016-17, more than 58m farmers were covered under the scheme, and the number dropped to around 56m in 2018-19. This has pushed up the scheme’s premium, which is shared by farmers as well as the central and state governments.

Mr Chaudhary believes the issue can be resolved if the central government was to intervene and increase the number of farmers under the scheme by ensuring that PMFBY coverage is over the entire country. “Currently, only 25% of districts contribute the bulk of the premiums. If the farmer base spreads to new places, companies can earn enough to remain in the scheme,” he said. 


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