Private insurance companies benefited the most from PM Fasal Bima Yojana: Report

What is the news?

Under the flagship scheme for crop insurance PMFBY, it is the private insurance companies that have benefited the most than the public insurance companies.

Context

The Pradhan Mantri Fasal Bima Yojana (crop insurance scheme) may have benefited some farmers, but insurance companies have made most of the benefits.

• In the five years since the scheme was launched, these companies received Rs 1,26,521 crore in premium payments and paid back Rs 87,320 crore to farmers in loss claims — leading to overall savings of approximately 31%.
• The department of agriculture and farmers welfare furnished these figures in its report to the Parliamentary Standing Committee on Agriculture’s report.

Note: Under the scheme, farmers are only required to deposit 1.5% of the entire premium (in the Kharif season) and 2% in the Rabi season. The remainder of the premium is deposited jointly by the federal and state governments.

Who benefited more?

• Two out of five public sector insurers paid more claims than the premium charged in the period indicating they made losses.
• Private enterprises, on the other hand, have grown by more than 30% in the last four years
• Private corporations that lost money or made small profits dropped out of the arrangement

Recommendations

• Spending profits on CSR (Corporate Social Responsibility)- Companies making profit from the scheme should spend it on rural development as part of corporate social responsibility (CSR) in the districts where they generate such profit.
• Opening offices in rural areas– insurance companies should not only open offices in rural areas, but also make the location and contact information public.