हिंदी साहित्य: पेन ड्राइव कोर्स
This just in:


Fines for Delaying Payment of Crop-Insurance Claims

  • 26 Apr 2019
  • 4 min read

Under a new rule introduced in October 2018 (which took effect in January 2019), insurance companies will have to pay fines for delaying payment of crop-insurance claims.

  • Enforcement of this new rule governing the Pradhan Mantri Fasal Bima Yojana (PMFBY) has revealed the magnitude of the problem:
    • Outstanding claims owed to farmers amounted to nearly Rs 530 crore until March 31, 2019.
    • It accrued over the past four sowing seasons between the Kharif and summer-sown season of 2016 to the winter sowing season of 2017-18.
  • About “eight companies” have now been slapped with a fine of Rs 16 crore for various delays.
  • As per rules, an insurance company must now make payments within 30 days of receiving all claims-related data, failing which penalty at a rate of 12% of the outstanding is levied.
  • Farmers, under PMFBY, have to pay between 1% and 2% of the total premium, depending on crops and sowing season. The rest is shared between the Centre and states on a 50-50 basis.
  • A majority of those fined are public-sector insurance companies since they have, between them, a majority share of the farm insurance business. Currently, 18 companies are impaneled to offer farm insurance. Of these, five are state-owned. The share of crop insurance business with state-owned firms is 52%.'
  • The two changes introduced are:
    • The fines, aimed at ensuring compliance of insurance companies with making timely payments.
    • It provides for penalizing state government for their share of the delay.

Consequences of Delay

  • Delay in paying compensation for crops ruined by weather shocks can have a domino effect on the fortunes of individual farmers and the overall economy.
  • Such delays can push millions of farmers into poverty, leaving them with little money for the next sowing season.
  • Such delays hamper farmers’ ability to service their agricultural loans, pushing them closer to the brink of default. Farm insurance is compulsory for any farmer taking an agricultural loan.
  • Such vicious cycles of delayed payments, among other issues, were one of the factors behind massive protests by farmers in the last two years to demand farm loan waivers


  • Fixing responsibility is a positive step, but the penalty has to have a valid reason. Claims cannot be cleared just because data has been cleared by states.
  • There can be a discrepancy in claims data sent by states or consequential delays from state governments, which often cause delays in releasing premium.

Way forward

  • If the PMFBY scheme is to achieve its most critical goal, timely payouts to farmers must be ensured.
  • It should rely on high-end technological fixes, from drones to even a new constellation of satellites, for accurate crop damage assessments, which is the key to faster processing of claims.
SMS Alerts

Please login or register to view note list


Please login or register to list article as bookmarked


Please login or register to make your note


Please login or register to list article as progressed


Please login or register to list article as bookmarked