The government-backed crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) has turned profitable in the first quarter of FY2019 (April to June 2018) after bleeding for two years. Better pricing coupled with low claims have led to underwriting profits in crop insurance.
Launched in 2016, the PMFBY loss ratio for most insurers was 140-145% in the first year.
The agriculture ministry’s data showed PMFBY had a sum insured amount of INR1,900bn ($27bn) and premium volume of INR243.5bn in FY2018. In the fourth quarter too, losses stayed in the range of 120-130%, reports Moneycontrol.
Since the crop cycle of kharif (monsoon crop) and rabi are seasonal, the first few months of calendar year 2018 saw losses on the rise again. However, towards May 2018 when the pricing stabilised and technology was being used in a widespread manner for crop-yield determination, the loss situation has changed.
For instance, the country's largest general insurer New India Assurance’s crop insurance portfolio had an underwriting profit of INR439.8m in 1QFY2019 compared to a loss of INR78.9m a year ago.
As the central government plans to increase coverage of PMFBY to 50% of total crop area in FY2019, insurers say that this will spread the risks across a wider base and will help lower losses further over the next three quarters of the current fiscal year ending 31 March 2019.