Agriculture insurance companies seem to be making huge profits as claims paid out by them have been consistently reducing over the years.
Have a look at the below statistics from the Ministry of Agriculture and Farmers’ Welfare:
|Year||Gross Premium (In Rs. Cr)||Claims Paid (In Rs. Cr)||Ratio of gross premium-to-claims paid|
This data submitted to the Parliament shows that agriculture insurance premium has been going up every year while claims payment is down under the Pradhan Mantri Fasal Bima Yojana (PMFBY). In the first three years of the program, the gross premium collection to payment of claims was high, leading to many private insurance companies leaving the scheme.
This non-payment or delayed payment of insurance claims plaguing the agriculture insurance sector year after year have caused the farmers to lose faith and complain.
The consistent decline in payment of farmers’ claims shows that there is a structural flaw in the program.
The Flaw is this: Insurance companies do business with banks that provide loans to farmers. Banks directly transfer premiums to companies. There is no communication between the insured and the insurer. A communication gap.
The reality is that farmers who face crop loss due to inclement weather are clueless about who to contact to report their losses within 72 hours as per rule. The central government has acknowledged this major complaint from farmers against insurance companies.
The disputes between insurance companies and state governments on discrepancies in yield data, delay in providing state government’s share of funds, non-deployment of sufficient personnel by insurers etc., are further reasons leading to the reduction in claims ratio.