Insurers are bracing for significant crop insurance claims across multiple states as weather-related losses threaten to push up payouts. According to reports from The Economic Times, Maharashtra has declared drought-like conditions in 265 talukas, raising concerns over this year's losses. The state has implemented an 80:110 'cup and cap' model where insurers' liability is capped at ₹1,540 crore before the state government takes over claims beyond that level. The premium pool in Maharashtra has fallen to around ₹1,400 crore this year from ₹3,400 crore last year, putting the 110% threshold at roughly ₹1,540 crore. Meanwhile, Andhra Pradesh is also experiencing drought conditions, adding to the pressure on insurers across multiple regions.
Karnataka has adopted a contrasting approach by opting for full risk transfer in areas covered by the Pradhan Mantri Fasal Bima Yojana, leaving insurers exposed to the risks they underwrite. As reported by The Economic Times, this approach differs significantly from Maharashtra's shared liability model. The risk-sharing mechanism limits insurers' exposure, but in a bad crop year, could leave the state government with a larger bill if claims rise sharply. The 80:110 model operates where farmers' entitlements remain unchanged, but the cost sharing changes based on claim levels - if claims remain below 80% of the premium, the surplus is returned to the state; insurers bear the cost between 80% and 110%.
The crop insurance market is experiencing significant contraction, with industry estimates suggesting premium collections could fall to around ₹20,000 crore this fiscal from nearly ₹30,000 crore last year. According to The Economic Times, this decline is attributed to changes in state schemes and aggressive bidding practices. The industry's claims ratio was around 76% last year, but the impact of this season's drought will become clearer only after yield data is available. Crop-cutting experiments and yield assessments are currently underway for Kharif crops to determine the actual extent of damage.
Mini George, CMD Agriculture Insurance Company of India (AIC), stated that crop losses are due to adverse impact from El Nino conditions, but it is premature to estimate the claim quantum at this stage as crops are yet to be harvested or in process of harvesting. As reported by The Economic Times, AIC has deployed additional field staff and stepped-up coordination with state governments to assess losses and process claims. The final claims will depend on the yield estimates uploaded by state governments to the National Crop Insurance Portal. AIC has deployed additional field staff and stepped-up coordination with state governments to assess losses and process claims, to ensure timely support to the affected farmers.
