Short Note on Crop Insurance in India:

The Statutory Sanction for providing Insurance for Crops comes from S. 32
of the Insurance Act, 1938

Obligations of insurer in respect of rural or unorganized sector and

backward classes

32C. Every insurer shall, after the commencement of the Insurance Regulatory and
Development Authority act, 1999 discharge the obligations specified under section
32B to provide life insurance or general insurance policies to the persons residing
in the rural sector, workers in the unorganized or informal sector or for
economically vulnerable or backward classes of the society and other categories of
persons as may be specified by regulations made by the Authority and such
insurance policies shall include insurance for crops.

Also refer to MUTUAL INSURANCE COMPANIES AND CO-OPERATIVE

LIFE INSURANCE SOCIETIES

Definitions.95. (1) In this Part, before the date of commencement of the Insurance
Regulatory and Development

Authority Act, 1999, -

(a) "Mutual Insurance Company" means an insurer, being a company incorporated

under the Indian Companies Act, 1913 (7 of 1913), or under the Indian Companies
Act, l882 (6 of 1882), or under the Indian Companies Act, 1866 (10 of 1866) or
under any Act, repealed thereby, which has no share capital and of which by its
constitution only and all policy-holders are members;

and

(b) "Co-operative Life Insurance Society" means an insurer being a society

registered under the Co-operative Societies Act, 1912 (2 of 1912) or under an Act
of a State Legislature governing the registration of co- operative societies which
carries on the business of life insurance and which has no share capital on which
dividend or bonus is payable and of which by its constitution only original
members on whose application the society is registered and all policy-holders are
members:

Provided that any co-operative life insurance society in existence at the

commencement of this Act shall be allowed a period of one year to comply with
the provisions of this Act.

(2) Notwithstanding anything contained in sub-section (1), other cooperative

societies may be admitted as members of a co-operative life insurance society,
without being eligible to any dividend, profit or bonus.

(3) A State Government may, subject to any rules made by the Central
Government, empower the Registrar of Co-operative Societies of the State to
register co-operative societies for the insurance of cattle or crops or both under the
provisions of the Co-operative Societies Act in force in the State.

(4) A State Government may make rules not inconsistent with any rules made by
the Central Government to govern such societies, and the provisions of this Act, in
so far as they are inconsistent with those rules, shall not apply to such societies.

IDRA Act, 1999 S. 32 B

"32B. Insurance business in rural or social sector - Every insurer shall,

after the commencement of the Insurance Regulatory and Development
Authority Act, 1999, undertake such percentages of life insurance business
and general insurance business in the rural or social sector, as may be
specified, in the Official Gazette by the Authority, in this behalf.
                32C. Obligations of insurer in respect of rural or unorganised
sector and backward classes. - Every insurer shall, after the
commencement of the Insurance Regulatory and Development Authority
Act, 1999 discharge the obligations specified under section 32B to
provided life insurance or general insurance policies to the persons
residing in the rural sector, workers in the unorganised or informal sector
or for economically vulnerable or backward classes of the society and
other categories of persons as may specified by regulations made by the
Authority and such insurance policies shall include insurance for crops.".

A multi-crop insurance would require a lower premium given the lower

variability of multi-crop yield, to the extent single-crop yields are not
perfectly positively correlated. This is also more relevant for the farmer
since it captures the total income rather than the income from a single
crop.