What Ails PMFBY, the Crop Insurance Scheme and Why Are Farmers Not Satisfied with It?
In February 2020, the Indian government approved the revamping of the Pradhan Mantri Fasal Bima Yojana (PMFBY) or the crop insurance scheme to address some previous challenges in the implementation of the scheme.
The PMFBY is designed to protect farmers from natural calamities, pest or insect attack and diseases and help them get back on their feet by providing financial support through claim settlement.
The government made the scheme voluntary for all the farmers from Kharif-2020 onwards. Earlier, the scheme was compulsory for all the loanee farmers.
Now, farmers with loan dues can opt out of the scheme by submitting a simple declaration to their bank branch seven days before the cut-off date of enrolment.
However, there are still some issues being faced by farmers, the major one being change in the insurance company every year, which they feel makes it difficult to submit claims and grievance redressal applications, if any.
One of the readers, Santosh Kulkarni from Gadag district in Karnataka, shared his observations on the PMFBY scheme. He also shared feedback from farmers on the ground level. Based on his observation, Moneylife approached Shrirang Samant, who has worked in senior leadership roles in the general insurance industry, both in the public and private sectors, to understand the scheme. While he was not directly involved in the crop insurance business, he discussed this with several of his colleagues, who had worked in the segment and shared their feedback. We also approached another expert from the insurance industry, who shared his views on the scheme, but does not want to be named (we will refer to him as Mr Iyer).
According to Mr Samant, the PMFBY follows a detailed operational manual, which covers all aspects of the scheme, right through to claims and grievance redressal in respect of claims. These guidelines are updated every year, the latest one, operational for Kharif 2020 is available on the PMFBY website.
Broadly, the scheme covers a range of crop failure and diminution scenarios, at a basic crop unit of a loanee or non-loanee farmer. The geographical unit is a panchayat. Insurance companies are invited to tender and once that is accepted, the farmer pays a fixed percentage, the rest being paid by the state. There are well-defined procedures for lodging and adjusting claims.
Here are the excerpts…
Q. Every time there is new insurance company being empanelled and farmers have been asked to pay insurance premium before due date. In my view, stakeholders like farmers, state government, non-government organisations (NGOs) and other stakeholders should be heard or given an opportunity to present their opinion before appointing an insurance company for any state.
Shrirang Samant: The scheme is out for tender each year and the lowest (L1) insurer is naturally selected, which explains why there is a new insurance company each year. Payment of premium before the inception of the cover is mandated under Indian Insurance Act – remember this is an insurance scheme. As for the other stakeholders, both the central and the state government have prescribed a consultative mechanism which has to be followed each year.
Mr Iyer: Selection of insurance companies is carried out by the state government by adhering to operational guidelines issued by theunion government, under which sealed tenders are called upon and L1 (the lowest) bidder is selected as the implementation agency.
Q. Every year farmers across the nation will pay premiums by the due date. When it comes to claim settlement, there is no fixed timeline. When we contact the insurance company to obtain premium payment receipt details, they ask us to approach the PMFBY helpline. Generally this helpline does not attend to any calls.
Shrirang Samant: Claim settlement follows a laid down process – the starting point is the assessment of the shortfall in the yield on the basis of crop cutting experiments (CCE). The PMFBY scheme operates on the basis of ‘area approach’ i.e. the defined areas for each notified crop. For widespread calamities like draught and flood the insurance unit is the village or village panchayat or any other equivalent unit.
Mr Iyer: There are strict guidelines for cut off dates of submission of yield data by states to insurance companies (usually two months after harvesting).
Also, the insurance company needs to pay the claim within the stipulated time, usually 21 days. In case insurers do not pay the claim within the stipulated time, there is also a provision of levying penalty on the insurer.
3. There are no details of crop loss estimation done by officials of the government or insurance companies anywhere.
Shrirang Samant: Loss estimation is done on the basis of predetermined sample ‘yield’ of a number of crop fields, to determine the actual yield against the yield insured. The results of loss data for an ‘area’ have to be loaded on the portal. This is not in the hands of the insurance company but is the responsibility of the concerned state. All the estimations of yield or crop losses should be compulsorily uploaded within the stipulated timeline on the NCIP by the concerned stakeholders and the admissible claims will be calculated on the NCIP. The status of claims and the claim amount will accordingly be shared with the farmers through NCIP.
Per para 23.4, the loss reports and actual yield data shall be approved or reverted (in case of any discrepancy, concern on the authenticity, correctness of report or data) by the insurance company. Based on the loss reports and actual yield data, eligible claims are calculated through the NCIP and accordingly the payment of claims are initiated by the concerned insurance company and remitted directly into the beneficiary account as per the pre-defined timelines. The application-wise payment details viz. amount, reference number and date are entered or synchronised with the National Crop Insurance Portal -NCIP.
Mr Iyer: Crop loss estimation in localised surveys is filled in the presence of the farmer only and a representative of the insurer along with one of the state government records it in their apps. Similarly, crop yield estimation is also done in front of the farmer and recorded in the app provided by the government of India.
4. There is no mechanism to lodge a complaint or grievances by the stakeholders of the PMFBY scheme, like the banking and insurance ombudsman.
Shrirang Samant: Para 30 of the operational guidelines lays down an elaborate grievance redressal mechanism at district, state and central levels.
Para 30.6 also lays down a grievance redressal mechanism to be put in place by the insurance company.
Mr Iyer: There is a proper grievance redressal mechanism available on PMFBY portal. Farmers can also send their complaint to the respective block or district agriculture officer.
5. Recently I have raised an issue with the Prime Minister’s Office (PMO) through CPGRAMS, in response the nodal officer instructed Bajaj Allianz General Insurance Co officials to look into the matter. The insurance company gave me the standard reply that they have not received the required data from the concerned department.
Shrirang Samant: The insurance company will not pay the claim if the requisite data has not been received from the government – apparently form district level authorities in this case. Has the complainant lodged the grievance with the appropriate authority? I have also learnt informally that a number of farmers do not understand the process or are not educated sufficiently about it. What is needed is the effort on the part of the company or the government to educate the insured farmers. I imagine that the insurance companies do not want to commit resources to do so because of the peculiar structure of the scheme (tendering process works against long term commitment).
Mr Iyer: The insurance company can settle claims only when they receive the premium subsidies as well as the yield data in time. In Karnataka, the system is already highly evolved and the state has its own app and portal. In fact, the state has been highly proactive in the settlement of claims at the right time.
