Maharashtra farmers got lowest crop claims payout in 2020

MUMBAI: Farmers in Maharashtra have received the lowest-ever payout in 2020 under the Prime Minister’s Crop Insurance Scheme (PMFBY) since the scheme began in 2016. Farmers received Rs 823 crore, which amounts to just 14% of the Rs 5,801 crore premium paid to insurance companies, the latest data shows.

Only 12.3 lakh farmers benefited from the claims, also the lowest number since the scheme began. They account for 10% of the 1.2 crore cultivators who had applied for crop insurance in 2020.

The Prime Minister’s Crop Insurance Scheme may have widened insurance cover among farmers, but has faced protests across states. Critics allege that it is private companies who are gaining instead of farmers, with premiums collected outstripping claim payments and private insurers choosing not to bid for vulnerable areas to reduce liability. Several states have opted out of the scheme. Although it has been revamped, the scheme needs to take greater inputs from state governments and farmer groups and change its design to best serve India’s farmers.

“Since the payout was just 14% of the premium, this shows the high profit margins of insurance companies. It’s becoming important to cap the profit that these companies can make through the scheme,” said a senior officer. But insurance companies say that claim payments were less because 2020 was a good year. “In kharif 2020, the rainfall conditions received were optimal which led to a good harvest. This resulted in a lesser number of claim intimations. However, the claims received were settled as per the guidelines,” said Ashish Agarwal, head —Agri Business & CSC, Bajaj Allianz General Insurance.The final figures for the rabi season in the state are still coming in.

Chief minister Uddhav Thackeray has written to Union agriculture minister Narendra Singh Tomar suggesting a new crop insurance model wherein “insurance companies will have a maximum cap of profit upto 20% and maximum risk of 10% against premium collected”. This is the model which the state is implementing in Beed district.

Data shows that the highest claims under PMFBY in the state were paid in 2018-19 and 2019-20, where the claims to premium ratio was 94.7% and 112%. In these two years, the state faced drought and natural calamity. However, in the other three years of the scheme, the claims paid by the firms to farmers were lower than the premium collected by them. In 2016-17, the claims to premium ratio was 48.2% and in 2017-18, it was 76.4%. The gap was most glaring in 2020, when it plunged to 14%.

Under the PMFBY, the farmer pays 2% of the premium, while the rest is split between the Centre and state. However, the payout of claims to farmers can extend upto 350% of the premium. If the claims paid are less than the premium, the insurance firm can keep the amount that remains. Last year, drought-prone Beed district did not receive bids from private insurers so the state asked the public sector Agricultural Insurance Company (AIC) to step in. The company’s risk extends to110% of premium paid, with claims beyond that being borne by the state government. But, if the claim amount is less than the premium, then AIC can keep upto 20% of the premium amount remaining. The rest has to be returned to the government.

In Beed in 2020, AIC received premiums worth Rs 803.6 crore from farmers and the government for the kharif season. The claims paid to farmers were Rs 8.6 crore. The AIC kept Rs 160.6 crore of the remaining premium and returned Rs 634.4 crore to the government. “Under the Beed model, the insurance company reduces its risk in a bad year, but cannot profiteer beyond a limit in a good year. It is beneficial for the company and the state,” said a senior state official.