As certain sections of farmers are losing faith in insurance companies who are providing crop cover under PMFBY, we are here to analyse the ground reality of these allegations.
According to report by The Hindu, insurance companies involved in Pradhan Mantri FasalBima Yojana (PMFBY) have collectively paid 85 per cent claims against the premium collected in the last three years.
On the other hands, the government reports says that the difference between premium collected and claims paid by insurance companies is not the only profit for the companies. The cost of reinsurance and administrative costs are also borne by insurance companies.
According to the government reports, most general insurance companies, except Agriculture Insurance Company of India Ltd (AIC), undertake different types of businesses/policies. Thus, the overall profit/loss of these companies arises out of the profit/loss in these different lines of insurance.
However, it is also to be noted that several Agriculture organization and farmer leaders have allegations against the government that the scheme is benefiting the insurance companies rather than the farmers.
However, according to The Hindu report, as per provisions of PMFBY, the government is only paying premium subsidy and all liability of claims rests with the insurance companies. In case the premium-to-claims ratio exceeds 1:3.5 or the percentage of claims to sum insured exceeds 35 per cent, whichever is higher, at the national level in a crop season, then there is a provision to provide protection to the insurance companies. The losses exceeding the above-mentioned level in the crop season is met from equal contribution from the Central government and the concerned State government.
“This eventuality of claim ratio of 1:3.5 at the national level has not yet been triggered. In case losses are below the above-mentioned condition, insurers are responsible to settle the admissible claims,” the Minister informed the House. He added, “However, crop insurance is a major risk mitigation tool for the benefit of farmers. Insurance is all about spreading the risks over the period and over the area. As per the provisions of the PMFBY/RWBCIS, a premium from farmers along with Central and State governments’ share in premium subsidy, is paid to the concerned insurance company for acceptance of risk and payment of claims as per provision of the scheme.”
Reporting Source: The Hindu Business Line
