Why Many Indian Farmers Do Not Insure Their Crops?

Abstract Despite the introduction of the Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2016 to mitigate agricultural risks, formal crop insurance adoption among Indian farmers remains limited. Secondary evidence indicates that formal crop insurance coverage was as low as 7 % of farmers in earlier schemes and, even with PMFBY, only about 30-36 % of the gross cropped area was insured in subsequent years, well below national targets for risk protection programs. Reviewing secondary sources including NSSO reports and empirical studies, the analysis identifies multiple barriers to crop insurance uptake. Economic constraints—such as liquidity shortages, credit limitations, and high perceived costs—significantly deter small and marginal farmers from enrolling. Cognitive barriers such as lack of awareness, low financial literacy, and distrust in insurance mechanisms further suppress participation. Structural challenges including delayed claim settlements, complex enrolment requirements, and exclusion of key crops under scheme design erode farmer confidence. To enhance penetration, policy suggestions include targeted awareness campaigns, streamlined claim processes with transparent loss assessment, differentiated premium subsidies for vulnerable farmers, and integration of agricultural extension services. These measures aim to strengthen trust and reduce informational and economic barriers to broader crop insurance adoption in India.

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