News Non-Life20 Jul 2018

India:Insurers reap high profit margins from crop business

20 Jul 2018

The Modi government's ambitious crop insurance scheme earned around 85% profit, excluding expenditure on administrative purposes and reinsurance, during the 2017-18 kharif (monsoon) season, government data show.

All 17 insurance companies -- five government owned and 12 privately held -- empanelled under the scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY), posted a margin of INR150.29bn ($2.2bn) as they paid out claims of a mere INR27.67bn against premiums collected of INR177.96bn, reports Indo Asian News Service citing Agriculture Ministry data.Claims lodged, however, totalled INR50.52bn.

During the 2016-17 kharif season, insurance companies earned 44% profit as they received INR157.35bn in premiums and incurred claim payouts of INR88.62bn.

Similarly, insurers earned over 96% profit under another crop insurance scheme—Restructured Weather- Based Insurance Scheme—during kharif 2017-18 as they received INR16.94bn as premium and paid out INR699.3m in claim compensation.

The government and insurance companies cite a "good monsoon" and "higher production" for the low claims. But there were cases of extreme climatic conditions, drought like situations, and floods in many places, said Chandra Bhushan, deputy director of the non-profit Centre for Science and Environment.

"You cannot call it a good year to back low pay-outs since issues such as extreme climate and floods have been reported at many places. There are issues with assessment, payment dispersal along with technology issues. If claims are so low like 15% (of premium collected), the country's agriculture has no problem. There is no need to have any such crop insurance scheme then," he added.

As many as 33.2m farmers bought crop insurance under PMFBY to insure 33.5m hectares of land during kharif 2017-18.

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