Possible significant changes to the plan will be implemented after the 2023-24 crop year (July-June) cabinet approvalaccording to sources.
Pradhan Mantri Fasal The Insurance Scheme (PMFBY) launched in February 2016 aims at providing financial assistance to farmers suffering crop loss/damage due to natural calamities.
Under this scheme, the maximum premium payable by farmers is 2 per cent for all food and oilseed crops grown in Kharif (summer) season, 1.5 per cent for similar crops grown in Rabi (winter) season and commercial and horticulture crops. 5 percent for crops. ,
The difference between the premium payable by farmers and the rate of insurance charges is shared equally by the Center and the states.
The scheme was last revised in 2020 to enable voluntary participation of farmers and report crop loss within 72 hours of any incident.
According to official sources, the need for further reform of the scheme was felt as the exposure of insurance companies in PMFBY was reducing. This forced the existing insurers to charge higher premium rates due to lack of competition.
As per the policy, insurance companies are empaneled for three crop years through a tender process. Around 18 insurance companies were empaneled for the period 2019-20 to 2022-23. However, eight of them dropped out and 10 companies are now participating in the scheme.
Sources said eight firms had exited in the 2021-22 crop year, including four each from the government and private sector, due to heavy losses following high claim ratios.
However, in the absence of competition, the insurance companies which were left in the fray, fixed higher premiums. As a result, some companies made huge profits during the last crop year as claims of crop loss were low.
Sources said this has led some state governments to believe that only insurance companies are benefiting from PMFBY and not farmers.
To tackle the problem, sources said a working group – which was constituted in 2021 Ministry of Agriculture – Investigated the entire matter and submitted a detailed report.
Sources said the working group has recommended two approaches to implement the PMFBY.
There is a “risk transfer approach”, which is currently being followed, in which the entire risk is transferred to insurance companies to implement. This would include bearing the entire claim liability by the insurance company.
The second is the “risk sharing approach”, which recommends three alternative models for states to adopt, in which claims as well as surplus premium amounts (earned after approving claims) are shared between the implementing states and the insurer. is shared according to a mutually agreed formula.
There are three models: the profit and loss sharing model; cup and cap model (60:130); and cup and cap models (80-110).
Under the profit and loss sharing model, sources said a state specific risk band would be created for sharing of profit and loss between insurance companies and the government. For example, for the band A state in Eastern India will be different from Maharasthra,
Under the cup and cap model (60:130), insurance companies will pay if the claims are between 60 and 130 percent of the gross premium. Suppose the claim is less than 60 per cent of the gross premium, then the government will refund it and if the claim is above 130 per cent of the gross premium, the government will pay the claim through insurance companies.
The third model suggested is the cup and cap model (80:110) which is the same as above but insurance companies will clear the claims if it is between 80 and 110 per cent of the gross premium, sources said. being implemented in Maharashtra and Madhya Pradesh,
According to sources, the working group has also suggested the use of latest technology like drones for quick assessment of crop damage and speedy payment of claims of farmers.
According to official data, the claim ratio in 2020-21 stood at 62.3 per cent of the gross premium. The reported claims were Rs 19,022 crore, of which Rs 17,676 crore has been paid so far.
During the 2022-23 crop year, claims under PMFBY stood at Rs 9,867 crore, of which Rs 8,793 crore has been paid so far, the data showed.