OVERHAULING CROP INSURANCE

Four years ago, when the government unveiled the Pradhan Mantri Fasal Bima Yojana (PMFBY), the crop insurance scheme, general insurance companies saw it as a big opportunity. Bulk of the premium was to come directly from the Centre as well as states. Customer acquisition costs were almost nil as states along with banks were sharing data of farmers. The farmers loved the scheme as their contribution was just 1.5-5 per cent of the sum assured. The Centre received kudos for using the insurance model to compensate farmers in distress. But today, all three stakeholders are dejected.

At present, the five state-owned insurers together account for over half the premium mobilised under PMFBY – close to ₹30,000 crore. One of the five, National Insurance Company underwrote a premium of ₹234 crore in the very first year, 2016, as against claims of ₹70 crore at the end of the year. The first year’s profits encouraged the Kolkata-based company to take bigger bets next year. In FY18, the company underwrote a massive premium of ₹1,542 crore,