The government’s move to increase the minimum support price (MSP) for 14 kharif crops will have minimal effect on the Pradhan Mantri Fasal Bima Yojana (PMFBY) as well as the crop insurance market, according to insurance company executives.
“The underwriting process for PMFBY does not depend on the prices or MSP for a crop. Instead, we look at the results of crop cutting experiments, historical yield data, irrigation, drought, and other factors, to price the premium,” said the head of a underwriting and claims department at a private insurance company.
Last year, during the 2017 kharif season, 32.7 million farmers paid Rs 30.3 billion towards to PMFBY, while the central and state governments contributed Rs 81.5 billion to the scheme, bringing the total premium revenue for insurance companies to Rs 193.8 billion.
Two insurance executives told Business Standard that PMFBY only provides an insurance cover on damaged crops prior to or after harvest which has been caused by various extraneous reasons.
There won’t be any direct effect on the premiums charged under the scheme, they said. An insurance executive said, “Some farmers have taken specific crop insurance covers to provide a security against monetary losses that arise when these crops sell in agri-markets below the MSP.”
"The only direct effect of the revised MSP is that it might provide an incentive for more farmers to enroll in PMFBY. The existing PMFBY enrolments may increase the size of their cover under the scheme,” said the underwriting and claims executive.