Weather Insurance in India

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Fair Weather
Network – How emerged? (1994 – 2010)
AKRSP
BCD
ABC
SADGURU
DSC
VRTI
EFG
SS
HIJ
BAIF
KLM
Coverage
Coverage of SS
31 Partners, 7660 villages, 18 Districts
Networking with NGOs
Cooperation
Coordination
Collaboration
•Crop Specific Workshops
•Exposure visits
•Congregations and Conventions
•Trainings & capacity building program
•Market linkages,
•Publication and Dissemination
of best practice
•Product Enhancement
•Cost reduction
•Risk Management
•Value Addition
Strategy for Agriculture Development
"Promotion of Rainfall Insurance in
Gujarat"
Typology of Key Risks in Agriculture
CAUSE
TYPE OF RISKS
Weather
Hail, frost, drought, flood, wind, fire, snow, ice
etc.
Market
Variability in Domestic & Intl. Prices, Changes in
Quality Standards & Consumer Preferences
Sanitary
Outbreak of Pests & Diseases
Storage
Infestation of pests and insects, Deterioration in
Quality
Man-made
Financial Crisis, Wars, Collapse of Legal or
Institutional Structures
Nature of Crop Losses
100%
80%
10%
20%
includes storms,
earthquakes, disease,
pests, wild animals
etc.
60%
40%
70%
20%
0%
Cause of Loss
Deficient Rainfall Excess Rainfall
Others
More than 90% of crop losses result from improper rainfall
Source: Data Compiled by GIC’s Crop Insurance Cell
Rainfall pattern in Gujarat
• Average Rainfall of Gujarat is 700 mm which
varies from 200 mm to 2000 mm in the state.
• Due to agro-climatic diversity, there are extreme
climatic conditions in Gujarat.
• Once in every 3 year, there is drought in Gujarat.
(declared in the years 1985, 86, 87, 98, 99,
2000, 01, 02 and 03.
Weather Insurance Overview
• Weather Insurance
– Contracts for providing risk coverage against adverse weather events
– Indemnification for losses due to unfavorable weather
• Examples of Adverse Weather Event
– More than 150 mm rainfall in a Day
– Drought Spell of more than 30 Days
– Winds Exceeding 30 kmph
• More Complex Weather Events can be
Covered
Weather Insurance in India
• Year 2003 – piloted by BASIX with ICICI Lombard General
Insurance Company in the Andhra Pradesh State of India.
• Year 2004 – Piloted by AIC in three states
• Year ‘2008’ marked 5 years of Weather Insurance in India
• Hon. Finance Minister allocated subsidy for Weather Insurance
to the tune of INR 1 billion and 500 million in annual budgets of
2006-07 & 2007-08 respectively
Weather Insurance in Gujarat
• Year 2005 – Piloted by SEWA in three districts of Gujarat
• Year 2006 – piloted with Study by Sajjata Sangh
Weather Insurance: Our Goal
• To enhance farmers’ risk management capacity and protection
levels,
– particularly those of small and marginal farmers
– for dealing with exogenous risks
– through the provision of a context-driven and well-analysed Weather
Insurance Product
– complemented by appropriate infrastructure and value-added support
services
• To inculcate clarity and critical understanding in the grassroots
partner NGOs of Sajjata Sangh about key aspects of a Weather
Insurance initiative
• Empower partner NGOs to propose suitable initiatives for risk
management in agricultural production in association with the
farming communities being served by them
Experience of Earlier Pilots
• Sajjata Sangh initiated a research study in 2006 for
– Study of rainfall risks & development of a customized
weather insurance product for groundnut in Jamnagar
• In 2006 itself, 35 farmers were covered under the
operational area of SAVA (partner NGO) for
– Sowing rain deficiency, Insufficient rainfall volume and
Poor rainfall distribution
• In 2007, 110 farmers bought customized product, thereby,
insuring 180 acres of land.
• In 2008, in Jamnagar and Amreli 350 farmers covering 427
acres of land were insured
Immediate benefits to farmers
• Year 2006, The farmers got the claim of Rs 1010 against premium of
Rs. 730
• Year 2008, In Jamnagar, out of total 203 farmers, 158 farmers have
received claim of Rs. 500 per acre for sowing and 45 farmers have
received Rs. 713 per acre for volume in deficit rainfall. In Amreli
District, total 35 farmers have received Rs. 465/- per acre of claim
under cotton crop for excessive rainfall against premium of Rs.750/- .
• Year 2009, 1353 farmers out of total 1377 farmers have received
claim ranging from 80 to 2800 for sowing & germination failure
(excessive rainfall ), deficient rainfall and rainfall distribution.
Replication
Particular
Kharif 08
Kharif 09
Kharif -10
(proposed)
Partners involved
4
8
12
Districts/ Taluka covered
2/5
8/25
11/35
Product Developed
4 Cotton,
GN
19 Cotton, GN,
Maize
Cotton, GN, Maize,
paddy, castor
Ref Weather station
2 IMD (>60
km)
25 GSDMA (<25
km) 6 AWS
GSDMA, AWS
Farmers covered
307
1377
15000
Small & marginal farmers
11%
59%
60%
Women Farmer covered
2%
9%
15%
Acre of land covered
357
1747
---
Total Sum insured
Rs. 1.6 million
Rs. 12.2 million
---
Total premium collection
Rs.1,83,274
Rs. 17,92,107
---
Claim received
1,27,360
17,98,000
---
Participatory Process
Sr.No Process
A
Product Design
1
Product review through experience
sharing workshop
2
Orientation on different products
3
Selection of design Options through
a Questionnaire-based exercise
4
5
6
Collection of 15 year rainfall data
Sharing draft product with farmers
Dialogue with Insurer for required
changes
7
8
Acceptance on draft Term sheets
Finalization on product/term sheet
Stack holders
 PRODUCT
DESIGNER,
 INSURANCE
COMPANY,
 PARTNER
NGOS,
 CBOS,
 FARMERS,
 METEREOL
OGICAL
STATION,
Contd.
B Awareness Campaign
Launch programme, Village Rally,
Night meetings, Vedio Shaw,
Resource group training etc.
C Premium collection & submission
D Post sale services (sharing rainfall
data, policy document etc)
E Claim settlement and declaration
OXFAM,
NABARD
NGOs, CBOs,
AIC, BANK,
PANCHAYAT
AIC, NGOs,
CBOs,
FARMERS,
WEATHER
STATION
AIC, BANK,
FARMERS
Challenges
High premium rate
• Due to the demand-driven product development and intensive
test-marketing, premiums for the targeted crops have come in
the range of 12%-15% of the sum assured
• Sum assured has been an intermediate value between the
cost of production and farmgate value depending on
influencing parameters of weather insurance
• 7.5% to 9% premium is a reasonable benchmark value for
farmers taking into account the escalation in costs of other
agricultural inputs
• No further scope for reducing the premiums by altering the
weather insurance parameters. Any downward revision to
severely undermine protection level and credibility of weather
insurance
Reference Weather Stations
• Single most important aspect determining the effectiveness
and credibility of Weather Insurance (from earlier pilots &
other research studies)
• Reduces basis risk which is one of the two biggest limitations
of Weather Insurance
• Third-party portable automatic weather stations authorized by
Agriculture Insurance Company of India – the insurer for the
proposed pilot
• Ensures high resolution, timely weather data which can be
regularly shared with the insured farmer clients
Other challenges
• Large basis risk inherent in rainfall index
• Rainfall insurance concept
• Time of premium collection
Opportunity for scale up
• Promoting weather insurance together with crop
insurance by the state Government.
• Designing farmer centric insurance products for
more crops and more blocks of the state.
• Interest shown by NABARD
Climate
change???
Disasters ??
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