Insurance Companies Earning Over Rs 10,000 Crore From Crop Insurance Every Year

• Farmers' premium contributions rise year after year, while contributions from state and central governments decline

Dinesh Wagh, a farmer from Solapur district in Maharashtra, experienced this firsthand. In 2024, he cultivated pigeon pea (tur) on his farm, but excessive heat completely destroyed the crop. Since he had insured his crop, he filed a claim with the insurance company to recover his losses. After the survey and assessment, the company paid him only Rs 6,670. Had the crop survived, he says he would have earned between Rs 70,000 and Rs 80,000 from its sale.

Dinesh also cultivates bananas. This year, he planted bananas on five acres, but storms and heavy rain during May and June fell plants on nearly 2.5 acres. Had the crop remained intact, it would have been ready for harvest in two months, generating an income of around Rs 12-15 lakh. Based on his previous experience with crop insurance, he had decided not to insure his banana crop this year.

However, according to farmers in his area who did purchase insurance, insurance companies follow predefined "trigger" conditions for claim settlements. For example, claims are paid only if crop damage occurs when temperatures exceed 45°C during summer or fall below 7°C during winter. Dinesh points out that temperatures in Solapur rarely cross 45°C or drop below 7°C, making it difficult for farmers to qualify for compensation even when crops suffer severe damage.

Another farmer, Dattatray Mule Patil, highlighted another concern. He said that in cases of storms, insurance companies also consider wind speed while processing claims, using data obtained from the weather department. Even if a farmer's crop has been destroyed, compensation may be denied if the recorded wind speed remains below the insurer's predefined trigger level.

On one hand, farmers continue to raise complaints about the crop insurance system. On the other, another set of figures presents a different picture. A comparison of the total premiums received by insurance companies and the claims they paid between 2018 and 2025 shows that since 2019, the gap has exceeded Rs 10,000 crore every year. 

According to data available on the Ministry of Agriculture and Farmers Welfare's Pradhan Mantri Fasal Bima Yojana (PMFBY) website, farmers, state governments and the central government together paid a total premium of Rs 2,17,260 crore over the last eight years, while insurance companies settled claims worth Rs 1,42,562 crore. This leaves a difference of Rs 74,697 crore over the eight-year period. However, this amount cannot be treated as the insurers' profit because they also incur operational and other expenses.

Total Premium, Claim Paid and Earnings

(Figures in Rs crore up to 30 June 2026, Source: pmfby.gov.in)

Kharif: Government Premium Support Declining for Two Consecutive Years

According to data available on the PMFBY website, the number of states implementing the scheme increased from 22 in Kharif 2024 to 24 in Kharif 2025. However, the total number of applications under the PMFBY and the Restructured Weather Based Crop Insurance Scheme (RWBCIS) declined from 9.62 crore to 8.47 crore during the same period.

Despite the decline in the number of applications, the premium paid by farmers increased by 48 percent to Rs 2,227.49 crore between Kharif 2024 and Kharif 2025. In contrast, the premium contribution by state governments declined by 44 percent, while the central government's contribution fell by 33 percent during the same period.

Premium of Kharif Crops

(Figures in Rs crore, Source: pmfby.gov.in)

Farmers' premium contributions for Kharif crops have increased continuously over the past two years since 2023, whereas the premium support provided by both state and central governments has declined during the same period. Farmers paid Rs 1,803 crore in premiums in Kharif 2023, which increased to Rs 2,227 crore in 2025. Meanwhile, the state governments' premium contribution fell from Rs 10,525 crore in 2023 to Rs 5,557 crore in 2025. The central government's contribution also declined from Rs 8,082 crore to Rs 5,049 crore over the same period. 

Rabi: Government Premium Contribution Has Been Declining Since 2021

During the Rabi 2024 to Rabi 2025 seasons, the number of applications under the PMFBY and RWBCIS declined from 52.9 million to 51.6 million. Despite this drop, farmers paid 1.25% higher premiums, amounting to Rs 1,441 crore. However, during the same period, the premium contribution by state governments fell by 29%, while the Central government's contribution declined by 19%.

Interestingly, the premium paid by farmers for Rabi crops has been increasing continuously since 2021, whereas the contributions from both the state and Central governments have been steadily decreasing. Farmers paid Rs 1,389 crore in premiums for the Rabi 2021 season, and this increased every year to reach Rs 1,441 crore in 2025. In contrast, the state governments' premium contribution dropped from Rs 5,408 crore to Rs 2,399 crore, while the Central government's contribution declined from Rs 4,316 crore to Rs 2,454 crore over the same period. 

Premium of Rabi Crops

(Figures in Rs crore, Source: pmfby.gov.in) 

Crop Insurance Introduced in 1985; PMFBY in Force Since 2016

The Ministry of Agriculture launched India's first Crop Insurance Scheme in 1985 to protect farmers against risks arising from natural disasters in agriculture. The scheme has undergone several modifications over the years based on suggestions from state governments, the farming community, and other stakeholders. The current Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in February 2016. Its operational guidelines were revised after considering findings from various studies, with the updated provisions coming into effect from the Kharif 2023 season.

The objective of PMFBY is to provide financial assistance to farmers whose crops are damaged due to natural calamities such as hailstorms, drought, floods, cyclones, heavy and unseasonal rainfall, as well as pest and disease attacks. However, after the scheme was launched in February 2016, not all states implemented it, and some states that initially joined later opted out. During the Kharif 2025 season, 24 states implemented the scheme, while 21 states implemented it during the Rabi 2025 season. In 2024, the scheme was implemented by 22 states during Kharif and 21 states during Rabi.

Alongside PMFBY, the Restructured Weather Based Crop Insurance Scheme (RWBCIS) was also introduced. The scheme is designed to protect farmers from losses caused by adverse weather conditions such as excessive rainfall, drought, high temperatures, and other unfavorable weather events. It primarily covers horticultural crops. Under RWBCIS, weather parameters are treated as a proxy for assessing crop losses, and insurance claims are settled based on pre-defined weather thresholds.

Premium Rates for Crops

Under the Pradhan Mantri Fasal Bima Yojana (PMFBY), the maximum premium payable by farmers is 2% of the sum insured for Kharif foodgrain and oilseed crops. For Rabi foodgrain and oilseed crops, the premium rate is 1.5%, while for commercial and horticultural crops, it is 5%. The remaining premium is shared by the Central and State Governments.

For the Northeastern and Himalayan states, the Centre and the states share the premium contribution in a 90:10 ratio. For all other states, the sharing ratio is 50:50. The scheme is voluntary for both states and farmers. It is a demand-driven scheme, allowing all farmers to insure crops and areas notified by their respective state governments.

According to the Ministry of Agriculture's Annual Report 2025–26, PMFBY and RWBCIS are being implemented through 20 empanelled general insurance companies, including five public sector insurance companies.