PMFBY: Reliance General Insurance Denied Claims for the Kharif 2021 Season

In a letter to the central government, Maharashtra's Agriculture Commissioner claimed that despite receiving the first installment of premium, Reliance General Insurance has not paid claims under the Pradhan Mantri Fasal Bima Yojana (PMFBY) for the Kharif 2021 season, while all other insurance companies have begun depositing the localised calamity and mid-season adversity claims amount in the affected farmers' bank accounts.

"Insurance firms have already received a premium sum of Rs.2312.22 crore in 2021. As a result, all insurance firms, with the exception of Reliance General Insurance Company, have begun depositing the localised calamity and mid-season adversity claims amount in the afflicted farmers' bank account," said Dheeraj Kumar, Commissioner Agriculture of Maharashtra, in a letter.

The insurer stated that it has a long-term contract (3 years) with the government of Maharashtra to execute PMFBY in accordance with operational guidelines provided by the government of India. According to these guidelines, the relevant premium subsidy must be given to compensate for the losses. The company's commitments to reinsurers and subsequent claim recoveries have been harmed due to non-receipt of payments.

The company stated in multiple communications that it has requested the department of agriculture, the government of Maharashtra, and the ministry of agriculture and farmer welfare to release the long-pending subsidy so that it can quickly clear the farmer claims with the assistance of its reinsurers.

Previously, the private insurer had complained about the excessive delay and non-receipt of premium subsidies during the last season.

Reliance General Insurance stated in a letter to the CEO of PMFBY that eligible claims for Kharif 2020 and Rabi 2020-21 seasons have been put on hold owing to non-receipt of overdue state share of subsidy of Rs.156 crore for Kharif 2020 and 34 crore for Rabi 2021 season. Furthermore, because the state contribution has not been released, neither has the corresponding central government share. As a consequence, the total premium outstanding against the previous season is Rs.355 crore.

As a result, it has not settled claims for the Kharif 2021 season. Reliance General Insurance received Rs.430.59 crore as the first installment premium for the Kharif 2021 season and wished to offset it against the state liability of premium subsidies for the previous season so that the farmers' balance acceptable claims may be satisfied.

"We believe the unilateral and arbitrary attempt to delay the release of due premium/claims will set a wrong precedent, have potential compliance issues with reinsurers and regulators, and impede effective implementation of PMFBY, in addition to a lack of commitments for future participation in the scheme by insurers," the insurer wrote in its letter.

Kumar stated in his letter that the reason for the pending subsidy component of Kharif and Rabi 2020 has been raised by the state (Maharashtra) before the government of India from time to time and that the government recently directed the state committee to resolve the issue by calling all insurance companies for deliberation on this issue.

As a result, the matter is still pending before the state grievance redressal committee, and Reliance General Insurance is in violation of rules by using this to refuse loss payments to farmers for Kharif 2021, according to the letter.

According to the letter, Reliance General Insurance earned Rs.2285 crore in profits from crop insurance schemes in Maharashtra over the last five years, yet the company's claims proportion to premium paid, 26.55 percent, is the lowest among all insurance firms. In contrast, Oriental Insurance has a payout ratio of 163%, Bajaj Allianz general insurance has a payout ratio of 148%, IFFCO Tokio has a payout ratio of 39%, HDFC Ergo has a payout ratio of 42%, and Bharti Axa has a payout ratio of 45%.

"This demonstrates that Reliance General Insurance Company is wilfully avoiding payments to farmers on some pretext or another; is wilfully suppressing losses occurred to avoid payments to farmers; and is resorting to total unethical and corrupt practises to tarnish the name of PMFBY and deny benefits of the scheme to farmers," Kumar wrote in his letter.