Banks & Insurers Jointly Liable For Crop Insurance Claim Denial Due To Portal Entry Error Under PMFBY: MP State Consumer Commission - 2025-09-18

Bank and Insurer Can't Pass the Buck on Crop Insurance Claims Over Portal Errors, Rules MP State Consumer Commission

Bhopal: The Madhya Pradesh State Consumer Disputes Redressal Commission, in a significant ruling, has held that both the bank and the insurance company are jointly and severally liable to pay crop insurance claims to eligible farmers, even if the bank fails to upload the farmer's details onto the designated online portal. The Commission, presided over by Justice Shantanu S. Kemkar (President) and Dr. Shrikant Pandey (Member), dismissed a batch of 20 appeals filed by the Bank of India, affirming the District Commission's order that found both institutions deficient in their services.

The Commission underscored that under the Pradhan Mantri Fasal Bima Yojana (PMFBY), once the insurance premium is deducted and accepted, both the bank and the insurer share the responsibility of ensuring the farmer receives their rightful claim, and they cannot absolve themselves by blaming each other for procedural lapses.

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Background of the Case

The matter arose from complaints filed by several farmers from Khandwa district who had taken agricultural loans from the Bank of India. For the Kharif 2018 season, the bank duly deducted the crop insurance premium from their loan accounts for their soybean crops under the compulsory PMFBY scheme. The collected premium was then transferred to the Agriculture Insurance Company of India Ltd.

Following widespread crop failure in their region, with government data confirming over 70% loss for the soybean crop, the farmers became eligible for compensation. However, their claims were never paid. The farmers approached the District Consumer Disputes Redressal Commission, Khandwa, which ruled in their favor, directing the bank and the insurance company to jointly pay the assessed claim amount, along with compensation for mental distress and litigation costs. The Bank of India subsequently challenged this order before the State Commission.

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Arguments from the Parties

• Bank of India (Appellant): The bank's primary contention was that its liability ended once it collected the premium and remitted it to the insurance company. They argued that the insurance company had accepted the premium, thereby establishing a contract with the farmer. The failure to pay the claim, they asserted, was the insurer's sole responsibility, regardless of the bank's administrative error of not uploading the farmers' data onto the official portal.

• Agriculture Insurance Company (Respondent): The insurance company countered that without the farmer's details being entered on the PMFBY portal by the bank, the farmer was not technically considered insured. They argued that the portal entry is a critical step for processing claims and seeking subsidies from the government. Therefore, the bank's omission was the direct cause of the non-payment, making the bank solely liable for the farmer's loss.

• The Farmers (Respondents): The farmers argued that they had fulfilled their obligations. The premium was deducted from their accounts by the bank as per the scheme's rules. They were caught in the crossfire between the two service providers and were being unjustly deprived of their legitimate claim despite suffering significant crop damage.

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Commission's Analysis and Reliance on PMFBY Guidelines

The State Commission meticulously examined the operational guidelines of the Pradhan Mantri Fasal Bima Yojana to delineate the responsibilities of banks and insurance companies. The judgment highlighted that the scheme is designed to provide a safety net for farmers, and procedural errors by implementing agencies should not defeat this core objective.

The Commission cited several key clauses from the PMFBY guidelines:

* Insurer's Liability: The scheme explicitly states, "The liability of payment of all claims shall be of the concerned implementing agencies [insurance companies] only."

* Data Collection Responsibility: The guidelines also mandate insurance companies to "collect/obtain the details of the insured farmers from the bank/financial institutions... and facilitate the banks to upload the same on crop insurance portal."

* Errors and Omissions: Crucially, the scheme holds both parties accountable for lapses. It specifies that banks must ensure no farmer is deprived of benefits due to their errors, and if such errors occur, the concerned bank is responsible for the losses. Similarly, it directs that insurance agents/companies must make good any losses arising from their errors or omissions.

Based on this, the Commission observed:

"It is clear that the complainant-farmer, despite being eligible to receive the insurance claim amount, has been deprived of it because the appellant-bank and the respondent no. 2 insurance company are trying to evade their responsibilities by blaming each other... Under the scheme, in such cases, both the bank and the insurance company have a joint responsibility to ensure that the eligible farmer receives the correct and timely payment of the insurance claim amount."

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Final Verdict

The Commission concluded that the Bank of India failed to prove any legal or procedural error in the District Commission's order. It held that the insurance company could not deny the claim solely on the grounds of non-entry of data on the portal, especially after receiving the premium. Both institutions were found jointly deficient in their service to the farmers.

The appeals were dismissed, and the orders of the District Commission dated July 21, 2022, and August 5, 2022, were upheld, providing significant relief to the aggrieved farmers.