Insurers may face higher crop cover claims in Andhra Pradesh, Maharashtra, Karnataka

Mumbai: Insurers are bracing for crop insurance claims in Maharashtra, Karnataka and Andhra Pradesh, as weather-related losses threaten to push up payouts.

In Maharashtra, insurers' liability could be capped at Rs 1,540 crore before the state government takes over claims beyond that level. The state has declared drought-like conditions in 265 talukas, raising concerns over this year's losses.

Maharashtra's adoption of an 80:110 "cup and cap" model links insurers' liability to premiums collected where insurers bear claims within the defined band, while the state government covers claims exceeding 110% of the premium pool.


Karnataka, by contrast, has opted for full risk transfer in areas covered by the Pradhan Mantri Fasal Bima Yojana, leaving insurers exposed to the risks they underwrite.

The premium pool in Maharashtra has fallen to around Rs 1,400 crore this year from Rs 3,400 crore last year, putting the 110% threshold at roughly Rs 1,540 crore. The figure is not an estimate of total claims, which will depend on the extent of crop damage. The cup-and-cap arrangement changes how the cost is shared between insurers and the government; farmers' entitlements under the scheme remain unchanged.

"Crop losses are there because of adverse impact 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." said Mini George CMD Agriculture Insurance Company of India (AIC). She added that crop-cutting experiments and yield assessments are under way for Kharif crops. 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.

The risk-sharing model like 80:110, limits insurers' exposure, however, in a bad crop year could leave the state government with a larger bill if claims rise sharply. If claims remain below 80% of the premium, the surplus is returned to the state; insurers bear the cost between 80% and 110%. The change comes as the crop insurance market shrinks. Industry estimates suggest premium collections could fall to around Rs 20,000 crore this fiscal from nearly Rs 30,000 crore last year, amid changes in state schemes and aggressive bidding.

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.