Crop insurance under a cloud

Insurance firms, both in the public and private sectors, have reportedly made a killing by offering crop insurance to farmers in about two dozen states. The Tribune reported abnormal gains by a dozen insurance firms through the Pradhan Mantri Fasal Bima Yojna (PMFBY). Insurers reportedly received a gross premium of Rs 22,362 crore under the scheme in 2016-17 and saved huge sums even after they settled 3.01 crore claims worth Rs 15,902 crore. This margin reportedly jumped to Rs 9,335 crore in the successive period, apparently due to a sharp decline in the number of claims to 1.26 crore. Insurance is a high-risk business and it is normal for firms to have huge margins in an event-free year. But, the non-payment of legitimate claims could also be a reason for unprecedented margins. A fair probe in this matter is, therefore, necessary.

Private insurers overwhelmingly participated in the PMFBY because of the government’s open-arm invitation. Naturally, they saw immense ‘profit’ opportunity, the sole guiding principle of any private venture. They cannot be criticised for making money, but profiteering from a social scheme is unacceptable. A thorough audit is a must to ascertain that the profit is legitimate.

The scheme per se is well intentioned. It promises to secure lives of Indian farmers and protect them from the vagaries of nature. Hopefully the government, mainly in states, takes adequate administrative measures to ensure quick disbursal of insured sums to aggrieved farmers as private insurers do not have any incentive to pay the farmers for their damaged crops. Risk assessment is up to the states, for instance, Punjab does not foresee any major failure of paddy and wheat crops in the manner covered under the scheme. Hence it declined to waste public money on unnecessary premium. The scheme involves huge public money and, therefore, the Comptroller and Auditor General (CAG) of India needs to conduct a performance audit to rationalise the premium amount. The projected margins indicate that there could be scope to further reduce the premium burden on the farmer by coaxing insurers against profiteering from a public scheme.