Aggressive Pricing Pulls Down Crop Insurance Premiums by Over 30% in FY26

India’s crop insurance sector saw a sharp drop in premiums in FY26, with collections falling by over 30% year-on-year. As per General Insurance Council (GIC) data, total crop insurance premium for April-August FY26 declined 34.29% to ₹6,781 crore, from ₹10,324 crore in the same period last year. 

The fall is attributed to aggressive pricing by insurers, re-tendering by states, and unsustainable loss-sharing under the Pradhan Mantri Fasal Bima Yojana (PMFBY).

Premiums Hit by Structural Changes and Aggressive Pricing

Leading insurer Agriculture Insurance Company of India reported a 4% drop in premium collections to ₹2,539.29 crore. States like Maharashtra have begun re-tendering contracts after 2 years instead of 3, triggering competitive undercutting. For instance, Maharashtra’s crop insurance premium fell from ₹9,000 crore to ₹3,000 crore under new contracts, drastically lowering total collections.

Loss-Sharing Model Under Strain

The 80:110 cup and cap structure, where insurers bear losses from 80% to 110% of premiums and governments cover the excess, is becoming unviable at current premium levels. Insurers are now struggling to maintain reinsurance support, while the profitability of other business lines is also under pressure due to cross-subsidisation of loss-making crop policies.

Read More: Haryana Govt Offers Financial Relief to Farmers, Postpones Loan and Power Bill Payments!

PMFBY and Farmer Premium Caps

Under PMFBY, farmers pay capped premiums: 2% for Kharif crops, 1.5% for Rabi crops, and 5% for commercial or horticultural crops. The remaining amount is subsidised by central and state governments. While this makes insurance affordable for farmers, it forces insurers into aggressive bidding to win state tenders, resulting in premium erosion and financial stress.

Conclusion

With FY26 crop insurance premiums projected to fall by a third from FY25’s ₹30,095.17 crore, the current model is under serious stress. Aggressive pricing, frequent re-tendering, and unsustainable loss-sharing threaten the long-term viability of crop insurance in India, prompting calls for structural reforms in policy and pricing mechanisms.

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