Insurers consider exiting national crop insurance scheme

A number of general insurers, facing losses from natural calamities, are understood to be reviewing their crop insurance portfolios and even considering exiting the class of business.

Listed non-life insurer, ICICI Lombard General Insurance, has already announced its decision to exit crop insurance under the government-backed Pradhan Mantri Fasal Bima Yojana (PMFBY) due to high reinsurance rates, reported Hindu Business Line. State-run reinsurer GIC Re has scaled down its crop insurance portfolio in the face of huge losses and claims.

However, Business Standard reported that at least three private-sector insurers, namely, ICICI Lombard General Insurance, Tata AIG and Cholamandalam MS General Insurance, have pulled out of the scheme.

According to government data, the gross premium under PMFBY in the fiscal year ended 31 March 2019 was around INR209.23bn ($2.95bn) while claims amounted to INR275.50bn. Interestingly, gross direct premium from crop insurance for all non-life insurers increased by 26.5% to INR192.18bn between April and September this year, against INR151.86bn in the corresponding half-year in 2018. An industry source says that a lot depends on the geographical areas covered by an insurer.

Sources say public-sector general insurers, such as National Insurance and New India Assurance, have been taking on more crop business along with a few private sector players. State owned agriculture Insurance, a specialised insurer, continues to provide the bulk of crop insurance.

According to the PMFBY website, 18 insurers are listed as participants in the scheme, including ICICI Lombard General Insurance, Tata AIG and Cholamandalam MS General Insurance.

PMFBY, which was launched in 2016, aims to provide comprehensive insurance cover against crop failure of the crop thus helping in stabilising the income of the farmers. The three have not bid for the scheme this financial year ending 31 March 2020.

Source: Asia Insurance Review