Page 32 - Insurance Times December 2020

empaneled public and private sector insurers, expanding the total of 146 million farmers (Agriculture Census 2015-16) in
ambit of coverage to localized losses and delayed / failed the country. Similarly, about 30% of the Gross Cropped Area
sowing and so on. Above all, PMFBY was a big step in (GCA) was insured under crop insurance in 2018-19. This
transforming the crop insurance sector in India from a purely points to a sizable protection gap as more than 2/3rd of total
farmer welfare programme to a market-based public private farmers in the country still remain uninsured. The outreach
partnership (PPP) model. may decline further as enrolment in PMFBY is now purely
voluntary, even for loanee farmers.
This new approach towards crop insurance though, has
already started causing jitters among many quarters. As The average insured landholding during the three years was
PMFBY completes three years of operations, many state at 0.96 which is slightly lower than the national average
governments have either already withdrawn from PMFBY operational holding of 1.08, thus indicating a higher than
or are thinking of introducing their own schemes. Some proportionate share of small holders in the insured
states are thinking of setting-up their own state-level population. Non-loanee farmers constituted about 38% of
specialized crop insurance companies. On the supply side total farmers insured under PMFBY in 2019-20. With the
many insurance companies have stopped bidding for PMFBY scheme now being made voluntary for loanee farmers, this
as they are facing difficulties in arranging reinsurance. ratio might improve.

Efforts to introduce remote-sensing technology for claims Client Value: The intrinsic value of a crop insurance product
assessment with a view to complement or replace manual lies in the extent and spread of financial protection it offers
CCEs have met with partial success only. Many studies have to farmers from the pool created through collection of
pointed out a clear dissatisfaction of farmers over the delays premium. The incurred claims ratio (ratio of premium
caused in claim settlements despite the government collected to claims paid) as well as claims incidence (the
introducing interest penalties on insurers. Amidst these proportion of farmers receiving claim payouts as against the
mixed signals, an objective analysis of the performance of total number of farmers insured). As can be seen from table
crop insurance in India over the last three years is attempted below, the average claims ratio for the last three years has
here, using recent data released by the government . been 81.1%. In other words, out of the total gross premium
1
of Rs 76,331 crores collected by the insurance companies,
Performance of Crop Insurance Schemes claims worth Rs 61,876 crores have been reported.

The efficacy of a publicly funded insurance programme is
broadly reflected in three parameters - outreach, client This is despite the generally good monsoon in the country
(customer) value and sustainability. The performance of two during these three years. This data dispels frequent
major crop insurance schemes (PMFBY and RWBICS) over allegations of profiteering by insurers from crop insurance,
the last three years (2016-17 to 2018-19) on all these as insurers also have to defray other expenses on
parameters is discussed below. reinsurance and administration from the premium collected.
A market-based system driven by demand and supply
Outreach: The primary indicator of the success of a social normally does not allow stakeholders to reap undue benefits.
insurance programme is its outreach among the target
population. The objective of de-risking the agriculture sector Claims incidence throws light on the spread of benefits
and improving the risk profile of farmers can be attained among the insured population. It can be seen that the
only when the outreach of crop insurance is sufficiently high. claims incidence has risen from 25.5% in 2016-17 to 29.1%
Available data suggests that almost 57 million farmers were in 2018-19. This means that the benefit in the form of claims
insured in 2018-19 as against 53 million in 2017-18 and 58 is reaching more than a quarter of total insured farmers
million in 2016-17 both Kharif and Rabi seasons put together. annually. Insurance is a mechanism through which
Thus, the number of insured has actually dropped in 2018- contributions by 'many' compensate for the losses suffered
19 as compared to 2016-17. by unfortunate 'few'. Apart from claims incidence, a steady
increase can also be seen in average sum insured, average
A total of 34.8 million farmers had enrolled for PMFBY during claim size, average claim per insured farmer and average
Kharif 2017 (www.pmfby.gov.in) which is roughly 24% of a claim per insured hectare. All these factors clearly indicate
1 Except other wise stated, basic data for this analysis is drawn from replies to unstarred questions nos. 548 and 579 in Rajya
Sabha given by the Government on 7th February 2020.
The Insurance Times, December 2020