The Pradhan Mantri Fasal Bima Yojana (PMFBY) has unveiled the gravity of delayed crop-insurance payments issue in India, with fines being imposed on insurance companies under a rule introduced in October 2018. As of March 31, 2019, outstanding claims amounted to almost Rs 530 crore over the four preceding sowing seasons. Now, eight companies face a Rs 16 crore penalty due to various delays in payment.
New Rules Encourage Timely Payment
According to the newly introduced regulations, insurance firms must settle claims within a month of receiving all related data or face penalties amounting to 12% of the outstanding total. Under the PMFBY, farmers are only required to pay between 1% and 2% of the total premium, depending on their crops and sowing season. The remaining cost is split evenly between the Centre and the states. Predominantly, public-sector companies have faced fines as they hold the majority share of the farming insurance market. Presently, there are 18 companies offering farming insurance, with five being state-owned. These five companies command 52% of the crop insurance business.
Impact of Delays in Compensation Payments
Delays in disbursing compensation for crops destroyed by unpredictable weather can have serious repercussions for both farmers and the national economy. Such tardiness can thrust countless farmers into poverty, leaving them without enough funds for the next sowing season. It also impairs their ability to repay their agricultural loans, nudging them towards the brink of default. Since farm insurance is obligatory for any farmer taking an agricultural loan, these postponed payments were amongst other reasons that sparked large-scale protests by farmers demanding loan waivers over the past two years.
Issues Around Responsibility Fixing
While holding entities accountable is a progressive step, the reason for imposing penalties must be valid. Claims can’t be cleared merely because states have approved the data. Discrepancies in claims data sent by states or resulting delays from state governments often results in slow premium release.
| Statistics Snapshot | Data |
|---|---|
| Outstanding claims as of March 31, 2019 | Roughly Rs 530 crore |
| Fine imposed on eight companies | Rs 16 crore |
| Crop insurance business with state-owned firms | 52% |
A Path Forward for PMFBY
If the PMFBY is to truly reach its primary objective of guaranteeing prompt payouts to farmers, it must utilize high-end technology to produce accurate crop damage assessments. This approach, which could use anything from drones to new satellite constellations, is critical to the speedy processing of claims.