News Excerpt:
During FY24, general insurance companies reduced their participation in crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY), despite government efforts to expand coverage in the agricultural sector.
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- The gross direct premium underwritten by insurers dropped by 4.17 percent to Rs 30,677 crore, down from Rs 32,011 crore the previous year, even as farmers faced losses due to floods, unseasonal rains, and heatwaves.
- In the previous fiscal year (FY23), crop insurance premiums had risen by 8.66 percent to Rs 29,465 crore.
Reason of Decline
- The recent decline is mainly due to a 32 percent reduction in premium income underwritten by the state-owned Agriculture Insurance Company (AIC), which fell to Rs 9,890 crore in FY24 from Rs 14,619 crore the previous year.
- Agriculture Insurance Company (AIC), the leading crop insurer in the country, along with New India Assurance, Oriental Insurance, and SBI General, all reduced their crop insurance exposure in FY24.
- Oriental Insurance Company also significantly reduced its exposure to Rs 8.94 crore from Rs 1,752 crore the previous year.
- SBI General Insurance cut back its participation as well. New India Assurance, the largest insurer in the country, reported a negative premium underwritten at Rs 34.41 crore, down from Rs 11.38 crore last year.
Challenges for Farmers
- FY24 was challenging for farmers, who faced crop losses due to various factors, contributing to rising inflation.
- However, general insurers overall saw a 19.5 percent increase in premium income underwritten, rising to Rs 20,786 crore from Rs 17,391 crore the previous year.
- Eight general insurers opted out of crop insurance during the year.
Pradhan Mantri Fasal Bima Yojana
- The PMFBY scheme, integrated with multiple stakeholders on a single platform, covered nearly 4 crore farmers with more than 50 different crops in FY24.
- Over 55 percent of the insured farmers were non-loanee farmers, mainly enrolled through common service centres (CSCs), which registered 4 crore farmer applications with 2.5 crore and 1.5 crore enrolments in the Kharif and Rabi seasons, respectively.
- PMFBY provides comprehensive insurance coverage against crop failure, helping stabilize farmers' income and encouraging the adoption of innovative practices.
- The scheme is mandatory for loanee farmers with crop loans or kisan credit card (KCC) accounts for notified crops and voluntary for other farmers with insurable interest in the crop.
- The maximum premium payable by farmers is 2 percent for all Kharif food and oilseed crops, 1.5 percent for Rabi food and oilseed crops, and 5 percent for annual commercial or horticultural crops.
Expansion of PMFBY coverage (Way Forward)
- To expand PMFBY coverage, the Ministry of Agriculture and Farmer Welfare launched AIDE (App for Intermediary Enrolment), allowing intermediaries to enroll non-loanee farmers from Kharif 2023 onwards.
- This initiative engaged insurance brokers, resulting in 71 percent of farmer enrollments through Point of Salespersons (PoSPs), totaling 6.88 lakh farmer applications covering over 4.15 lakh hectares across 11 states and 12 insurers.
- Utilising such an extensive network of over 12 lakh PoSPs via insurance brokers offers a substantial opportunity to increase non-loanee farmer enrolments.
- This strategy significantly enhances the enrolment of non-loanee farmers while simultaneously expanding their access to a diverse range of retail insurance products.
