Amid reviews of some insurance coverage firms making income within the authorities’s flagship crop cover scheme PMFBY, the Centre is planning to revamp the programme to rationalise premium price and encourage participation of more insurers. The doubtless key modifications to the scheme shall be carried out from 2023-24 crop 12 months (July-June) after the cupboard approval, in accordance to sources.
The Pradhan Mantri Fasal Bima Yojana (PMFBY), launched in February 2016, goals to present monetary help to farmers struggling crop loss/harm arising out of pure calamities.
Under this scheme, most premium payable by farmers is 2 per cent for all meals and oilseeds crops grown within the kharif (summer season) season, 1.5 per cent for identical crops grown in rabi (winter) season and 5 per cent for industrial and horticulture crops. The distinction between premium and the speed of insurance coverage costs payable by farmers is shared equally by the Centre and states.
The scheme was final revamped in 2020 to allow voluntary participation of farmers and make manner for reporting crop loss inside 72 hours of prevalence of any occasion. According to official sources, the necessity to additional revamp the scheme was felt as a result of publicity of insurance coverage firms within the PMFBY was on declining mode. This led to lack of competitors forcing the present insurers to cost excessive premium price.
As per the coverage, insurance coverage firms are empanelled for 3 crop years by way of a young course of. Around 18 insurers have been empanelled for a interval from 2019-20 until 2022-23. However, eight of them exited and 10 firms are taking part within the scheme now.
The eight companies had exited in 2021-22 crop 12 months, together with 4 every from authorities and non-public sector, due to heavy losses following excessive declare ratio, sources stated.
However within the absence of competitors, insurance coverage companies which have been left in fray mounted larger premium. As a outcome, some firms made enormous revenue over the past crop 12 months because the claims for crop losses have been much less.
This made few state governments consider that the PMFBY was benefiting solely insurance coverage firms and not the farmers, sources added. To deal with this downside, sources stated a working group — constituted in 2021 by the agriculture ministry — examined the entire challenge and submitted a element report.
Sources stated the working group has beneficial two approaches for implementing the PMFBY. One is the “risk transfer approach”, being adopted at the moment, whereby full danger is transferred to implementing insurance coverage firms. This will contain bearing complete declare legal responsibility by the insurance coverage firm.
Second is the “risk participation approach”, below which three various fashions are beneficial to states for adoption whereby the claims in addition to surplus premium quantity (earned after clearing the declare) is shared between implementing states and insurer as per the mutually agreed components.
The three fashions are: revenue and loss sharing mannequin; cup and cap mannequin (60:130); and cup and cap mannequin (80-110). Under the revenue and loss sharing mannequin, sources stated a state particular danger band could be created to share the revenue and loss between insurance coverage firms and authorities. For occasion, the band for Bihar shall be completely different from Maharasthra.
Under the cup and cap mannequin (60:130), the insurance coverage firms would pay if the claims are between 60 and 130 per cent of the gross premium. Suppose the claims are under 60 per cent of the gross premium, will probably be refunded by the federal government, and if claims are above 130 per cent of the gross premium then the federal government pays claims by way of insurance coverage firms.
The third mannequin steered is the cup and cap mannequin (80:110) which is identical as above however insurance coverage firms would clear claims whether it is between 80 and 110 per cent of the gross premium, sources stated, including that this mannequin is at the moment being carried out in Maharasthra and Madhya Pradesh.
According to sources, the working group has additionally steered use of newest know-how like drone for fast evaluation of crop loss and early fee of claims to the farmers.
According to official knowledge, the declare ratio in 2020-21 stood at 62.3 per cent of the gross premium. The reported claims have been Rs 19,022 crore, out of which 17,676 crore has been paid until date.
During the 2022-23 crop 12 months, the claims below PMFBY have been at Rs 9,867 crore, out of which Rs 8793 crore has been cleared to date, the info confirmed.