In a landmark decision addressing the grievances of more than 100 farmers from Parbhani district from Maharashtra, the national consumer disputes redressal commission (NCDRC) has pulled up the National Insurance Company Ltd for adopting an 'unreasonable and mechanical' approach in denying or underpaying claims under the Pradhan Mantri Fasal Bima Yojana (PMFBY). The commission found that the insurer failed to honour the spirit and intent of the central crop insurance scheme designed to protect farmers from natural calamities.
While allowing revision petitions filed by farmers from Parbhani district, in an order last week, the NCDRC bench of Dr Inder Jit Singh (presiding member) and Dr Sadhna Shanker (member) observed that farmers were left in the lurch despite paying premiums, as the insurance company selectively applied yield-based formulas while ignoring critical clauses pertaining to local natural disasters.
The petitioners—mostly creditor farmers mandatorily enrolled under PMFBY—had insured their Rabi 2017-18 crops, paid premiums through cooperative banks, and suffered total crop loss due to a severe hailstorm on 12 February 2018. The state revenue authority drew a panchnama confirming 100% loss, but National Insurance Company either delayed or denied compensation, citing procedural lapses and disputed the validity of post-disaster assessments.
Faced with inaction, the farmers approached the district consumer forum which ruled in their favour and directed the insurer to release the insured amounts. However, the insurance company appealed to the Maharashtra state consumer disputes redressal commission, which diluted the compensation, prompting the farmers to knock on the doors of the NCDRC.
In its verdict, NCDRC found the insurance company’s reasoning flawed, particularly its insistence that the farmers did not report losses within 48 hours as mandated by scheme guidelines.
The commission held that the insurance company had not provided any clear communication or platform for timely intimation, especially in remote rural areas. Moreover, NCDRC referenced a Bombay High Court ruling—upheld by the Supreme Court—that such technical objections cannot be the basis for claim repudiation in mass-coverage agricultural schemes.
The commission pointed to clause 10.5 of the PMFBY which deals with compensation in case of localised natural disasters. It stipulates that in events like hailstorms and floods, claims must be settled on an individual basis using local revenue records — a provision the National Insurance Company failed to honour, choosing instead to rely on broader area-based yield data.
“Farmers were clearly eligible for full compensation under the local disaster clause, but the insurer imposed a blanket formula meant for seasonal yield losses,” the bench noted. It added that the denial of claims, despite confirmation of total crop damage and premium payment, amounted to an unjustified dilution of the scheme’s objectives.
NCDRC further criticised the insurer for procedural lethargy, pointing out that compensation was delayed without due transparency. In many cases, the farmers were neither informed of their entitled sum nor given a reasoned breakdown of the assessed claim.
The bench found that where small amounts were credited, farmers accepted them without protest, often unaware that they had been underpaid — a situation exacerbated by poor awareness and the imbalance of power between insurer and farmer.
The commission rejected the insurer’s arguments that delay in filing and lack of sowing proof invalidated the claims, noting that the panchnama prepared by revenue officials served as admissible evidence. “Insisting on documents that small farmers cannot practically procure in crisis situations is both exploitative and contrary to the welfare spirit of the scheme,” it stated.
NCDRC’s order reaffirms that the purpose of the PMFBY is not to protect insurance company profits but to ensure farmers are shielded from economic distress due to crop failure. It reminded the insurer that premiums collected carry with them an obligation of fairness, and liability should not be defeated by 'bureaucratic interpretations' or 'selective compliance'.
This judgement is expected to set a precedent for similar disputes across the country, especially as public criticism grows over the performance of PMFBY, under which insurers have reportedly made windfall profits while farmer distress remains unaddressed. As per reports, several insurance companies, including National Insurance Company, have come under scrutiny for rejecting or slashing claims while collecting significant premiums subsidised by the Union and state governments.
The commission also noted that any future failure to abide by scheme guidelines in letter and spirit could result in penalties and contempt action. It has directed the insurer to process the pending claims in full, in accordance with local disaster clauses and individual loss assessments, within a stipulated time frame.
The judgement reaffirms the critical role of consumer courts in protecting vulnerable sections like farmers from systemic exploitation, particularly when public welfare schemes are hijacked by procedural opacity and profit-driven models.
(Revision Petition NoNC/RP/1111/2023 Date: 1 July 2025)
