PM Fasal Bima Yojana changes, a reply to criticism over insurance firms – The Hindu BusinessLine

The Centre has decided not to fork out its share of the premium subsidy (45-49 per cent) if the premium amount on a crop insured in a particular region under PM Fasal Bima Yojana exceeds 25-30 per cent of the sum insured. Its move comes amidst growing allegations that the PMFBY is benefitting insurance companies more than anyone else. The sum insured is calculated on the basis of scale of finance, which is a measure of the loans that can be given per acre per crop. Hence, a farmer is generally entitled to a loan of ₹23,000 per acre for paddy and ₹44,000 per acre for sugarcane, and this is likely to be the sum insured. Hence, a higher premium hurts the Centre and the States besides the farmer, who pays 1.5-5 per cent of the premium. It is, however, notable that 40 districts account for 50 per cent of the insurance claims under the PMFBY. If the claims ratio here renders existing levels of premium unsustainable, the Centre and States need to work out a solution. The insurance regulator should look into whether there is genuine price discovery in the premium bids invited from insurers with respect to a particular cluster.