Several farmers, who had opted for the highly subsidised Pradhan Mantri Fasal Bima Yojana (PMFBY), report delays in claims settlement, according to an impact assessment study of the Centre’s flagship scheme since its launch nine years ago.
“Many farmers reported receiving compensation between three to fourteen months after crop loss, undermining the schemes’ core function of enabling timely reinvestment,”, the comprehensive study carried out by the centre for management in agriculture at the Indian Institute of Management (IIM) has stated.
Technology and timelines for streamlining claims
The study has recommended involvement of farmers, government, and insurers collaboratively in transparent and inclusive loss assessment processes for streamlining claims process.
“Enforce strict timelines, leverage user-friendly GPS, GIS, e-file tracking, weather stations live feed, etc techniques for transparent assessments, and ensure compensation reflects actual losses,” the study conducted for the agriculture ministry has stated.
The study has recommended expansion of crop insurance coverage to more crops and risk types – especially damages from wild animals and wildfires, tailored to regional agro-climatic needs. Currently PMFBY compensates farmers suffering crop loss and damage arising out of unforeseen events.
A provision of a 12% penalty on delay in payment of claims by insurance companies is auto calculated on the National Crop Insurance Portal, according to an agriculture ministry submission in parliament.
For promoting competition and flexibility, the study has recommended allowing multiple insurance providers to operate in each region and offer flexible premium payment options.
Addressing low literacy and scheme evolution
The IIM analysis stated that because of low insurance literacy, especially amongst non-loanee farmers, they consider taking crop insurance as ‘added cost’ rather than a crop risk management.
“This challenge is compounded by cumbersome enrollment procedures, low transparency in premium deductions, and weak outreach by implementing agencies,” it stated.
Under PMFBY aims at providing comprehensive risk coverage from pre-sowing to post-harvest stages of crops, 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 with the exception of north-eastern states where the premium is split in a 9:1 ratio between the Centre and states.
For promoting competition and flexibility, the study has recommended allowing multiple insurance providers to operate in each region and offer flexible premium payment options.
According to the agriculture ministry, over Rs 1.82 lakh crore has been paid to farmers under PMFBY since its launch in 2016 as compensation which was five times of the total premiums of Rs 35,864 crore paid by them under the scheme
While stating that PMFBY and Restructured Weather Based Crop Insurance Scheme (RWBCIS), launched together have undoubtedly expanded the scale and scope of crop insurance in India, IIM report has stated “their long-term success hinges on addressing fundamental issues of inclusivity, administrative efficiency, and data accuracy,”.
The study has recommended that the schemes must evolve beyond risk transfer to serve as developmental tools that promote climate resilience, financial inclusion, and credit access.
To reduce delays in claim settlement, the ministry has made it mandatory for states to open escrow accounts for deposit of their premium share in advance from the current kharif season (2025-26).
Meanwhile, the number of farmers enrolled has increased from 3.17 crore in 2022-23 to 4.19 crore in 2024-25, an increase of 32%.
Since its launch in kharif, 2016, 27 states and union territories have implemented the scheme in several seasons. However, Bihar, Telangana, Andhra Pradesh, Jharkhand, West Bengal and Gujarat opted out of the scheme for factors including financial constraints. However, Andhra Pradesh and Jharkhand have re-joined it.
In 2016, the PMFBY was compulsory for all loanee farmers who have Kisan Credit Cards and availed of agricultural loans. In 2020, the scheme was made voluntary for loanee farmers.
Over 100 crops notified the crop insurance covers incidents including inundation, landslide, cyclone, hailstorm, drought and post-harvest losses.
Currently fourteen out of the 20 empanelled insurance companies, both in the public and private sector are implementing the scheme.
The centre has incurred Rs 15,864 crore under PMFBY as per the revised estimate of FY25.