Insurance companies will have to pay a penalty of 12% to farmers on the claims if there is a delay in claim settlement beyond stipulated period under the Pradhan Mantri Fasal Bima Yojana (PMFBY) agriculture minister Shivraj Singh Chouhan said on Tuesday. “If there is a delay, the insurance company will pay a 12% penalty, which will go directly to the farmer’s account. If we look at the reasons for the delay, the biggest reason is the delay in releasing their share of the premium subsidy by most states,” Chouhan said in Lok Sabha.

Chouhan said many times the yield data is received late and in some cases, disputes arise between the insurance company and state. “It has been made mandatory to assess the loss not visually but through remote sensing at least 30% of crops covered,” he said.

Sources said earlier delays in settlement of farmer’s claims under crop insurance were not tracked as there was no centralised information system. However with the launch of a common portal settlement time for insurance claims by the farmers can be assessed on a real time basis.

The guideline of PMFBY states that states or union territories will not be allowed to implement the crop insurance scheme in subsequent years in case of considerable delays by states in releasing the requisite premium subsidy to concerned insurance companies. The cutoff date for invoking this provision for kharif and rabi seasons is Marc 31 and September 30 in the succeeding year respectively.

The PMFBY which was launched in 2016, is currently implemented in 22 states and UTs. Farmers pay a fixed premium of just 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops.

The balance premium is equally shared between the Centre and states. For North-Eastern states, the premium is split in a 9:1 ratio between the Centre and states. Participation in PMFBY is optional for farmers.

In FY24, enrollment under the PMFBY crossed a record 39.7 million, and it is projected to increase significantly in the current fiscal.

The official said the crop insurance scheme is gradually moving towards a subscription-based model rather than a loan-based scheme. “More than 42% of farmers who are enrolled under the crop insurance are those who had not availed loans from the banks,” the official said.

In terms of area, coverage of heavily subsidised crop insurance scheme last fiscal has crossed 61 million hectare in, which is an increase of around 21% from the 2022-23.

Since the launch of PMFBY in 2016, Rs 32,440 crore were paid by farmers as their share of premium against which claims of around Rs. 1.63 trillion have been paid to them.

“For every 100 rupees of premium paid by farmers, they have received about Rs. 500 as claims,” the agriculture ministry had stated in a note.

For PMFBY, the finance ministry has allocated Rs 15,000 crore for FY25, while the revised estimate for FY24 stands at Rs 14,600 crore. Several insurance companies, both in the public and private sectors, are implementing the crop insurance scheme. The PMFBY is the third largest insurance scheme globally in terms of premium and shields farmers from crop losses or damage arising out of unforeseen events.