A third of crop insurance claims under India’s key scheme not being honoured

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Reports that insurers are yet to clear as much as a third of the over Rs 15,000 crore claimed by farmers as crop insurance for the Kharif 2019 season has forced the government to write to state governments urging them to invoke the penalty clause on insurance companies that have defaulted on settling the claims made by farmers under the Pradhan Mantri Fasal Bima Yojana (PMFBY).

While four public sector insurers — AIC (Agriculture Insurance Company), Oriental Insurance, New India Insurance and National Insurance — together were yet to settle claims of Rs 2,589 crore as on June 29, six other companies in the private sector could not clear Rs 2,142 crore, official data shows.

AIC, the largest PMFBY player, has disbursed Rs 7,117 crore accounting for 83 per cent of  its outstanding to farmers against claims of Rs 7,946 crore by 29 June, 2020.

However, New India and Orient still have outstanding amounts at 92% and 66% respectively of the claims. IFFCO Tokio and Reliance General, according to the data, were reported to have not paid 99% and 94% respectively of the farmers’ claims by 29 June, 2020.

According to PMFBY/ WBCIS norms, settlement of claims has to be completed by insurers within 60 days from crop cutting experiment (CCE) date, failing beyond which states can levy penal interest at 12% per annum on them and pass on the interest proceeds to the farmers.

States are also empowered to relax the norms on the basis of genuine reasons for the settlement delays. The CCEs, done during harvesting period to assess the actual yield, start from October and end in January for most of the kharif crops. However, as some crops like tur or cotton in Maharashtra are harvested late, the CCEs are completed by end of April. So, all kharif insurance claims are required to be settled by end-June latest.

Under the PMFBY, farmers pay a fixed premium 1.5% of sum insured for rabi crops and 2% for kharif, while it is 5% for cash crops. The balance premium is paid by the Centre and states in a 50:50 ratio. The premium is decided through a bidding process every year. However, effective from this season the Centre has allowed states to fix premium for 3 years.

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