Farmers who have opted for the government’s crop insurance scheme – Pradhan Mantri Fasal Bima Yojana (PMFBY) – have realised it’s a long wait for claiming money under the scheme. The delay for reimbursements can go up to 18 months with the Central and state governments delaying the payment of premium to insurance companies, industry officials said.
Most of the state governments are delaying payment of premium which, in turn, leads to delay in payments to farmers, said the former Chairman of an insurance company. The government is likely to make some changes in PMFBY soon. On the delay in payment to farmers, ICICI Lombard Executive Director Alok Agarwal said, “the subsidies of Central and state government need to come in time and then only the claim needs to be paid by the insurance company. We have seen that money starts coming in from the sixth month and it takes almost 18 months when the full money comes in. Even if the insurance company pays in 7 to 21 days after the receipt of the money, the delay could be an average of 12-18 months.”
While the premium paid by the farmers on crop insurance is just 2 per cent (for kharif crop) of the total premium, Central and state governments chip in with 98 per cent of the premium. For rabi, the share of premium of farmers is even less at 1.5 per cent.
Insurance companies are also facing challenges while enrolling farmers under the PMFBY. “In some areas, if farmers feel that the weather is good and they are going to get a good crop, they would prefer not getting debited (insurance premium from bank account). You have cases where farmers, like in Maharashtra, say that you have no right to debit. They say you should take our permission to debit. In some cases, bankers themselves decide… if the season is good, why debit? You have these challenges as far as loanee farmers are concerned,” said Alamelu T Lakshmanachari Chairman & MD, Agricultural Insurance Company of India (AIC).
Two years after the launch of the PMFBY, majority of farmers are still not aware of the scheme. “In our crop insurance, more than 90 per cent are loanee farmers. There was a study which said 70 per cent of the farmers are not aware of the scheme itself. Even if a farmer is aware of the crop insurance he doesn’t know how much premium he will have to pay, when the claim will come, how much I’m insured and whether it’s coming from the loan account, he’s not aware of. So the trust deficit is there,” said an official of SBI General Insurance.
“In states like Tamil Nadu where there was a drought in 2016-17, it’s not that farmers are not aware of the scheme. They feel we need to take insurance when there’s a calamity,” AIC CMD said. “In Kerala we found hardly anybody is covered. When the floods came they discovered that in their term sheet they have excluded excess rainfall. They were asking when can excess rainfall happen. We only have drought… so let’s cover drought. Their crops were not covered,” Lakshmanachari said.
The number of farmers covered by the scheme has fallen by around 15 per cent to 4.79 crore during the year 2017-18 when compared to the previous year. However, premium collected under PMFBY increased from Rs 22,180 crore in 2016-17 to Rs 24,454 crore in 2017-18. “The number of farmers covered is not likely to fall in the current year,” said former New India Assurance Chairman and MD G Srinivasan.
The use of modern technology in crop insurance has also not taken off. “When the scheme was introduced, the intent was to use technology to a large extent. As we went on, we found that there were many practical issues which resulted in delay but the chief reason cannot the insurance company alone,” Agarwal said.