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PMFBY: Insurance companies have collectively paid 85% claims against premium collected

Losses exceeding premium-to-claims ratio 1:3.5 in the crop season are met from equal contribution from the Central government and the concerned State government.

Kanika Dhamija
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  • 2016-17: Gross premium collected 21,937 Cr; Claims paid 16,782 Cr

  • 2017-18: Gross premium collected 25,346 Cr; Claims paid 21,951 Cr

  • 2018-19: Gross premium collected 28,725 Cr; Claims paid 25,785 Cr

Insurance companies empanelled under Pradhan Mantri FasalBima Yojana (PMFBY) have collectively paid 85% claims against the premium collected, according to the government.

The difference between premium collected and claims paid by insurance companies is not the only profit for the companies. The cost of reinsurance and administrative costs are also borne by insurance companies.

Minister for Agriculture and Farmer Welfare Narendra Singh Tomar said that for insurance companies, no upper or lower limits of profit and loss are set. According to the government, most general insurance companies, except Agriculture Insurance Company of India Ltd (AIC), undertake different types of businesses/policies. Thus, the overall profit/loss of these companies arises out of the profit/loss in these different lines of insurance.


As per provisions of PMFBY, the government is only paying premium subsidy and all liability of claims rests with the insurance companies. In case the premium-to-claims ratio exceeds 1:3.5 or the percentage of claims to sum insured exceeds 35%, whichever is higher, at the national level in a crop season, then there is a provision to provide protection to the insurance companies. The losses exceeding the above-mentioned level in the crop season is met from equal contribution from the Central government and the concerned State government.

“This eventuality of claim ratio of 1:3.5 at the national level has not yet been triggered. In case losses are below the above-mentioned condition, insurers are responsible to settle the admissible claims,” the Minister informed. He added, “However, crop insurance is a major risk mitigation tool for the benefit of farmers. Insurance is all about spreading the risks over the period and over the area. As per the provisions of the PMFBY/RWBCIS, a premium from farmers along with Central and State governments’ share in premium subsidy is paid to the concerned insurance company for acceptance of risk and payment of claims as per provision of the scheme.”


Figures: Rajya Sabha question and answers dated March 20, 2020

News: The Hindu

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