The late seasonal rains of winter have damaged the rabi crop across India. Most of the farmers will look to the government for some sort of financial relief…but a few will be safe due to crop insurance.Whereas the insurance provided by the government in the past covered the risk from drought, floods, and pest attacks, the new private insurers and the new insurance policy also cover variations in rainfall, frost, lack of sufficient sunshine—the policy even covers variations in temperature, wind speeds, and humidity!The agriculture insurers have created a weather index to arrive at a threshold figure of these parameters and require the payment of a premium per acre from the farmer. Based on variations from the threshold figure the farmer is paid a sum of money—the greater the variation (and hence the greater the damage) the larger the amount paid.The private companies selling crop insurance are ICICI-Lombard and Iffco Tokio but the government-controlled Agriculture Insurance Company of India covers a much larger part of the country with their insurance schemes.The commodity trading in farm products and the use of financial instruments like futures will also help the farmers in realizing a better price for their season’s hard work.
See the weather-index based insurance product developed by ICICI Lombard with support from ICICI Bank and the World Bank (WB)
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