CAG, CSE rap crop insurance plans

Government-pushed insurance schemes have achieved little and only benefited entities in the sector, the office of the Union comptroller and auditor general (CAG) has concluded, as has another report from the non-government Centre for Science and Environment (CSE).

The CSE report says insurance companies had benefited by a cumulative Rs 10,000 crore in profit as on April, due to low claims reported in relation to the premium charged.

The gross direct premium of general insurance companies grew by 32 per cent, from Rs 96,376 crore in 2015-16 to Rs 1.27 lakh crore in 2016-17, nearly half of which came from crop insurance, the CSE report said.

The CAG report was presented in Parliament on Friday; the CSE analysis was released to the public.

The CAG report examines crop insurance schemes - National Agriculture Insurance Scheme (NAIS), Modified NAIS and the Weather Based Crop Insurance Scheme (WBCIS), implemented during 2011-12 through 2015-16. The CSE study analysed the new Pradhan Mantri Fasal Bima Yojan (PMFBY), which replaced all these schemes from kharif 2016 onwards.

Fundamental problems and issues remained almost the same in both the old crop insurance schemes and the new PMFBY. The CSE study says till this April, insurance companies collected a gross premium of Rs 15,891 crore, against claims of only Rs 5,962 crore, ensuring a profit of almost Rs 10,000 crore.

The percentage of non-loanee farmers as compared to loanee ones remained negligible.

A big reason for the low claim settlement in relation to premium collected could also be because of delays in states releasing their share of the subsidy; CSE analysis says this was 32 per cent of the claims reported. In PMFBY, the rule says claims must be paid to farmers within three weekdays of yield data by insurance companies; yet, on-ground claims made for kharif 2016 were not fully settled.

This problem continues from the older schemes. In 2014-15, data showed 14 per cent of the claims remained unpaid when NAIS, MNAIS and WBCIS were in operation; this rose to 37 per cent in 2015-16.

The percentage of claims still outstanding was 32 per cent by the end of 2016-17, when the new PMFBY was launched.

"Claim settlement is delayed when states don't share their portion of subsidy or don't complete crop cutting exercises (CCE) or the Centre doesn't release its share of subsidy," a senior official from state-run Agriculture Insurance Company told Business Standard.

The actuarial premium rate charged by insurance companies under PMFBY in 2016-17, says the CSE report, was on an average a high of 12.55 per cent, much more than earlier schemes.

This also meant that the burden on the farmer was lower under PMFBY but was much more on the government exchequer.

The CAG report noted Rs 32,000 crore released as premium subsidy and claims reimbursement to insurance companies under the old crop insurance schemes might not have reached the intended beneficiaries — there was no record or data on this.

And, that due to poor implementation of the crop insurance from 2011 to 2016, when the earlier Congress-led government was in power, Rs 3,622.8 crore was released to private insurers without proper verification.

The CSE report also says in the revamped PMFBY, the threshold yields fixed by state governments for determination of claims was much lower, leading to lower settlements. CCEs were also fraught with discrepancies, making difficult the paying of legitimate claims.