Awareness of the benefits of insurance coverage seems to be increasing in rural India. A recently released survey on financial inclusion by the National Bank for Agriculture and Rural Development (Nabard) shows that the number of rural households covered by insurance has increased sharply. While vehicle insurance is popular, crop insurance also finds many buyers.

In 2021-22, 86 percent of agricultural households reported having some form of insurance; This is a significant increase from 26 percent in the 2016-17 Nabard survey. Among insurance types, vehicle insurance increased from 5 percent in 2016-17 to 60 percent in 2021-22. In the same period, health insurance increased from 5 percent to 21 percent, accident insurance from 2 percent to 13 percent, and life insurance from 17 percent to 26 percent.

Maya Kant Awasthi, who teaches Food and Agribusiness Management at IIM Lucknow, said the rise in various types of insurance such as vehicle, health and accident insurance in rural areas is due to the increasing aspirations of rural people, homogenization of the market and narrowing of the gap between urban and rural consumers due to greater interaction.

Fasal Bima coverage is increasing

Prime Minister’s Fasal Bima Yojana, which provides crop insurance at various stages of the crop cycle, is the largest insurance scheme targeted at farmers. This plan expands the footprint, although the execution is a bit buggy.

The number of farmers covered by PMFBY has tripled in the last five years. While 5.3 crore farmer applications were insured under PMFBY in 2018, this figure increased to 8.4 crore in 2020 and 14.2 crore in 2023.

Data shows that around 56.8 crore farmer applications have been received from 2016 to 2024 under PMFBY. However, only 41 percent of farmer applicants received the requested amount. The program covers 30 percent of the gross cropped area across the country.

General requests made under PMFBY are also decreasing. In 2018, claims totaled ₹ 25,507 crore, falling to ₹ 18,393 crore in 2021 and ₹ 12,380 crore in 2023.

Awasthi noted: “Encouraging groundwater expansion through tube wells, along with subsidies for tube wells and multiple sources of irrigation, has reduced the impact of crop loss on the latter part of the land. “With these alternative sources, there is less chance of crop failure, which contributes to reduced insurance claims.”

Nabard data also shows that wealthy farmers are more likely to have crop insurance. Among farmers with more than 2.0 hectares of land (large farms), the proportion of respondents with crop insurance increased from 8 percent in 2016-17 to 23.8 percent in 2021-22. In the survey, for farmers with an area of ​​1.01-2.0 hectares (medium-sized farms), this rate increased from 10.8 percent to 21.5 percent, while for farmers with an area of ​​0.41-1.0 hectares (small farms), this rate increased to 1.5 percent. It increased from 5.1 to 8.8 percent. period.

Manage bonuses

Elsevier’s Diary, Progress in Disaster ScienceHe explains that wealthier farmers are more likely to adopt crop insurance due to greater liquidity and easier access to credit, which helps them manage insurance premiums. In contrast, less affluent farmers often face limited cash flow, which can inhibit insurance adoption unless they have access to formal credit options such as bank loans.

The Standing Committee’s report for 2022-23 highlighted issues with the PMFBY scheme and noted delays in compensation payments due to late publication of yield data and premium subsidies by states. Return-related disputes between insurance companies and State governments remain a significant problem.

The report suggests that insurance companies should open offices in every tehsil as farmers face difficulties in insurance-related matters due to lack of local representatives to assist them.