Insurers are seeking commissions of 5-8% of premiums during ongoing crop insurance renewals, a significant increase from the 3-5% range in the previous renewal cycle. According to industry officials, this push comes amid increased competition among foreign and domestic reinsurers and improved profitability in the crop insurance segment. As reported by Business Standard, earlier commissions ranged between 0.5% and 6% of premiums, with insurers now seeking up to 8% due to better business performance. A reinsurance official noted that earlier commissions were around 3-5% of premium, while insurers are now seeking 5-8% because of better profitability in the business.
Most states have floated one-year tenders this year, with the process beginning in May and expected to conclude by the end of June or early July. According to Business Standard, this represents a shift from earlier three-year tender periods. The delay is attributed to the Centre considering a new three-year scheme, which has not yet been introduced, prompting states to proceed with shorter-term tenders. Industry experts explained that the delay was due to the Centre considering a new three-year scheme, which has not yet been introduced, prompting states to proceed with one-year tenders. Negotiations are still underway and contracts have not been concluded, with reinsurance officials noting that despite pressure, there is still some sanity in the market.
The main risk factor being considered is El Niño, with insurers demanding higher commissions due to crop insurance being a favourable business over recent years. As reported by Business Standard, the last two years witnessed favourable monsoon conditions and healthy agricultural production, contributing to a more balanced claims environment. However, agriculture remains exposed to multiple uncertainties including El Niño events, rainfall deficits, input cost pressures, and geopolitical developments that can materially influence crop yields and claims experience. According to Ashish Agarwal, Head Agri. Business & CSC at Bajaj General Insurance, the main risk factor being considered is El Niño, with insurers demanding higher commissions because crop insurance has been a favourable business over the last few years and competition among reinsurers has increased.
Under the Pradhan Mantri Fasal Bima Yojana (PMFBY), farmers pay relatively low premiums — up to 2% of sum insured for kharif crops, up to 1.5% for rabi crops, and up to 5% for commercial and horticultural crops. The sum insured for a farmer is determined by the scale of finance per hectare for a specific crop, as decided by the District-Level Technical Committee and pre-declared by the State-Level Committee, with the total sum insured calculated by multiplying the scale of finance by the area of the notified crop proposed to be insured. The balance premium is shared equally by the Centre and state governments, except in North-Eastern states and Himalayan states where the ratio is 90:10. The scheme provides three alternative risk-transfer structures including cup-and-cap models (80:110 and 60:130) and a profit-and-loss-sharing model, with more states moving towards cup-and-cap arrangements from traditional models.
According to PMFBY data reported by Business Standard, gross premium declined to ₹19,147.59 crore in FY25 from ₹29,661.65 crore in FY23, while claims paid also fell over the period, reflecting improved loss experience. Ashish Agarwal, Head Agri. Business & CSC at Bajaj General Insurance, emphasized that sustained insurer participation depends on actuarially viable pricing, policy stability, and timely implementation decisions, noting the market is currently navigating a transition period with states assessing participation following Government of India directions issued in May. Premium rates in the segment have also steadily declined over the past few years, contributing to the improved financial performance.
