Are insurance companies earning profit from PMFBY?

In the last three years, insurance companies involved in Pradhan Mantri Fasal Bima Yojana (PMFBY) have collectively paid 85 per cent claims against the premium collected.

The government said 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.

Minister for Agriculture and Farmer Welfare, Narendra Singh Tomar, told Rajya Sabha in March that for insurance companies, no upper or lower limits of profit and loss are set. According to the government, 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.

Farmer leaders and organisations have repeatedly alleged that the government had planned the scheme to benefit insurance companies rather The govt said, as per provisions, all liability of claims rests with the insurance companies than to help farmers. However, the government said, 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.

The Minister informed the House, “However, crop insurance is a major risk mitigation tool for the benefit of farmers. 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.”

Agriculture expert and economist HM Desarda said that for private insurance companies profit is paramount, andnot farmers’ welfare. “The PMFBY is not benefiting farmers but it is helping insurance companies. We need a totally new perspective and approach to insurance and farming to address agrarian distress,” said Desarda, who is also a former member of the State Planning Commission. He added that a public sector insurance company would play a more effective role than private companies.

Source: Pressreader

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