Crop insurance coverage down grade in FY20 as top four insurers cut risk

Despite pressure from the government to expand insurance coverage in the agriculture sector, general insurance companies reduced their exposure in crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY) during FY 2024.

Gross direct premiums written by insurers declined 4.17 percent to Rs 30,677 Crore during the financial year, compared to Rs 32,011 Crore in the previous year, while farmers faced crop losses due to floods, unseasonal rains and heat waves.

Crop insurance premium had improved by 8.66 percent to Rs 29,465 Crore in the previous financial year (FY23).

According to data released by the General Insurance Council, the decline is mainly due to a 32 percent decline in premium income by state-owned Agricultural Insurance Company (AIC) to Rs 9,890 Crore during FY2024 from Rs 14,619 Crore a year ago. AIC is the foremost crop insurer in the country. Four government-controlled insurers – AIC, New India Assurance, Oriental Insurance and SBI General – reduced their exposure to crop insurance in FY24.

Interestingly, AIC paid claims worth Rs 12,353 Crore under PMFBY during the year.

State-owned Oriental Insurance Company also concentrated its coverage to just Rs 8.94 Crore in FY24 from Rs 1,752 Crore a year ago. SBI General Insurance also reduced its exposure. The country’s largest insurer New India Assurance Company recorded negative premium of Rs 34.41 Crore as against Rs 11.38 Crore last year.

“Four insurers embarrassed directly or indirectly by the government reported a turn down in crop insurance coverage. Agriculture sector is an important sector of the economy. Public sector entities should have been at the forefront in providing cover to farmers facing the risk of losses due to floods, heat waves and unseasonal rains,” said an official of an insurance company.

FY24 was a nightmare for farmers as they faced crop losses due to multiple factors, leading to increased inflation levels.

However, general insurers generally reported a 19.5 percent increase in premium income to Rs 20,786 Crore from Rs 17,391 Crore a year ago. At least eight general insurers stayed away from crop insurance during the year.

As per the Service Level Agreement (SLA), insurance intermediaries should provide enrollment services to the non-loanee farmer through AIDE (mobile and web platform) developed by the Ministry of Agriculture. Once the application is successfully submitted on AIDE and acknowledgment is issued to the non-loanee farmer, the premium will be collected and remitted to the insurance companies as per the time frame specified in the applicable operational guidelines of PMFBY and RWBCIS. Amendments are made from time to time.