CROP AND AGRICULTURE INSURANCE

Ankitaa A Bhattacharji (283004) Akhilesh Gupta (283018)

Pratik Gadia (28312) Karan Kapur (283025)
Rushabh Gala (283013) Sameer Roopawalla (283038)
 Need of agricultural
History of Agriculture insurance in India

•In the world about 2.5 billion •India is Replete with famine,
people depend on agriculture. drought and food shortages.

•India is an agrarian society.

• Between 1770 and 1880, as many
as 27 food scarcities and famines
•75% of population depends on
agriculture for livelihood.
were recorded.

•Agriculture contributes 24% of the •At least 20 million lives were lost
Indian GDP.  in India in about 20 famines that
had struck since 1850.
•Employment to 57% of work force .
•Landlords or zamindars exploited
•Source Raw material to large the farmers inducing slavery and
number of industries like (textiles, further debt.
silk, sugar, rice, flour mills, milk
products) .
 What is insurance?

•Procedure or contract
securing compensation for
loss, damage, injury, or death
on payment of premium.
Benefits of insurance to
agriculture
•Promise of reimbursement to
the farmers in the case of loss. •Provided Self-sufficiency.

•Guaranteed high quality standards.

•Insurances cushioned the blow to

the farmers.

•Risk free hence stress free yielded

better crops which fed the farmers
and hence fed the country.
 Agriculture Insurance
Company of India
Limited(AIC)

•Public sector undertaking

headquartered in New Delhi,
India.
• AIC has taken over the implementation of
•Offers area based and weather National Agricultural Insurance Scheme
based crop insurance programs (NAIS) which until Financial Year 2002 – 03
in almost 500 districts of India. was implemented by GIC.

•Covers almost 20 million • AIC is under the administrative control of

farmers, making it one of the
biggest crop insurers in the
world.
•Promoted by General Insurance
Corporation of India (GIC),
NABARD and the 4 Public Sector
General Insurance companies.
Ministry of Finance, Government of India,
and under the operational supervision of
Ministry of Agriculture.
• Majority of AIC's business is derived from
the compulsory nature of crop insurance
at the time of an agricultural loan, as
directed by the Government of India.
Crop Insurance In Asian Crop Insurance In
Countries INDIA

•Sri Lanka •Assurance in the Central Legislature.

•Thailand •In favour of homogenous area approach.

•Crop Insurance bill.

•First Individual Approach Scheme (1972-1978)

on H4 cotton.

•Scheme covered 3110 farmers.

•Study conducted by Prof. V.M. Dandekar.

 YEARS Number of Farmers Premium Claims paid Claim‟s
Pilot Crop Insurance states covered collected (Rs.lakh) ratio ( % )
(Rs.lakh)
Scheme(1979) 1979-80
1980-81
3 16265
23442
5.53
6.93
5.29
3.27
95.71
47.10
3
1981-82 8 24625 7.55 9.64 127.67
•Launched by GIC based on 1982-83 9 50855 15.65 37.32 238.46
1983-84 11 60349 21.15 8.37 39.56
“Area approach”. 1984- 85 12 447086 138.20 91.80 66.42
Total - 622622 195.01 155.68 79.83

•Covered cereals, millets,

oilseeds, potato & chickpea.
Shortcomings
•Scheme based on voluntary
basis. •Linking of this scheme to crop loans.

•The premium paid was shared •Lack of awareness.

between the GIC and State
Governments in the ratio of 2:1.
•Sum insured.
•Range of insurance premium.
•Major commercial crops like cotton and
sugarcane were excluded.
•The unit of insurance was too large to reflect
actual crop losses.

•50% subsidy.
 Comprehensive Crop
Insurance Scheme(CCIS)
Why was this scheme
conceived?
•To provide a measure of
financial support to farmers in
the event of a crop failure as a
result of drought, flood, etc;
•To restore the credit
eligibility of farmers, after a
crop failure, for the next crop
season.
•To support the production of
cereals, pulses, and oil seeds.
Details of CCIS
•Risk coverage was shared between
the GIC and the State Governments
in the ratio 2:1.
•Participation in the scheme was
voluntary.
•All farmers who avail crop loans
from banks are eligible for insurance
coverage.
•The sum insured is equal to the crop
loan disbursed, subject to a
maximum of Rs 10, 000 per farmer.
•The premium payable is 2% of the
sum insured for wheat, rice, and
millets and 1% for oil seeds and
pulses.
•50% Subsidy.
 Performance of the scheme during the past five years
Shortcomings of CCIS
YEARS FARMERS TOTAL INS. CLAIMS PAID CLAIM RATIO
COVERED (Rs. CHARGES (Rs. IN LAKH)
IN LAKH)
•The crop insurance scheme covers
only loanee farmers leaving the
majority of the farmers uncovered. 1994-95 5187198 2970.90 5793.40 1.95
1995-96 5657739 3433.03 14867.37 4.33
•Low flat premium rate and 1996-97 5846985 3935.20 17151.02 4.36
resultant high claim ratio made the 1997-98 6001199 4147.58 17128.59 4.13
scheme practically unviable. 1998-99 6197585 4635.24 3543.69 0.76

•The scheme covers only a limited

number of crops. Financial performance of CCIS in seven countries
COUNTRY PERIOD INDEMNITY:
PREMIUM RATIO
•limit of sum insured is too low (Rs
India 1985-89 5.11
10,000 per ha.) to cover the input
cost. Brazil 1975-81 4.29

Costa Rica 1970-89 2.26

Japan 1985-89 0.99

•The unit of insurance is too large
Mexico 1980-89 3.18
to reflect actual crop losses.
Philippines 1981-89 3.94

USA 1980-89 1.87

 National Agriculture
Insurance Scheme, Rabi
1999-2000
“Rashtriya Krishi Bima
Yojana”

Why was this scheme

conceived?

•Financial Support.

•To restore the credit

eligibility.

•To encourage Progressive

Farming.

•To help stabilize farm

incomes.
Details of NAIS Crops Covered under NAIS

•Compulsory for all Loanee During Kharif

Farmers and voluntary for Non-
Rice Soyabean Banana
Loanee Farmers. Groundnuts
Jowar Turmeric
Bajra  Castor
•10% subsidy. Maize Sunflower
Blackgram Sugarcane
Greengram Cotton
•State Level Co-ordination Redgram Chillies
Committee on Crop Insurance
During Rabi
(SLCCCI).
Rice Blackgram
Jowar (UI) Chillies
•Operates on the basis of “Area Bengalgram Onion
Approach”. Maize Groundnut Mango
Sunflower
Greengram
•“Pilot Area Mandal To Village”

 
 Sum Insured

Sr. Season / year No. of Area Sum Premium Compen-

No farmers covered insured collected sation 
covered in ha (Rs) (Rs) paid (Rs)

1 Kharif 2000 17.71 23.92 178138 5116.60 2926.26

2 Rabi 2000-01 2.15 3.19 23954 403.40 564.79
3 Kharif 2001 15.66 23.31 175594 5042.50 8764.34
Key point
4 Rabi 2001-02 2.09 3.10 24658 411.63 124.23
5 Kharif 2002 16.79 24.14 207999 5607.07 24935.96
•If the Actual Yield is 6 Rabi 2002-03 1.45 2.39 19271 394.68 1069.49

higher than the threshold 7 Kharif 2003 14.99 22.06 203020 5415.21 20035.04
8 Rabi 2003-04 2.35 4.08 34043 668.88 1456.63
yield (Guaranteed) the
9 Kharif 2004 23.56 36.90 339833 9862.14 8583.95
compensation will be Nil.
10 Rabi 2004-05 2.36 3.99 35992 736.13 712.90
11 Kharif 2005 19.80 34.03 319953 9804.53 49335.01
12 Rabi 2005-06 2.67 3.97 45282 922.15 357.96
13 Kharif 2006 19.65 31.34 364053 10732.30 53989.57
14 Rabi 2006-07 2.94 5.15 57689 1234.37 19.31
 Benefits of NAIS Flaws of NAIS
•Limits of the sum insured
•Lofty goal of financial liability.
removed.

•Localised calamities also •Mandatory for Loanee

brought into the purview of farmers.
coverage.
•Adverse selection, Incase of
•Premium rate rationalised Non-Loanee farmers.
according to the crop.
•Premiums do not equal risk
•Additional crops covered level.
under the scheme including
annual, commercial, and
horticultural crops.
 National Crop Insurance
Scheme 1999-2000
Why was this scheme
conceived?
•To provide insurance coverage
and financial support to the
farmers in the event of natural
calamities, pests & diseases.
•To encourage the farmers to
adopt progressive farming
practices, high value in-puts and
higher technology in Agriculture.
•To stabilize farm incomes.
. •Provide significant benefits not
Benefits of NCIS
•A critical instrument of
development in the field of crop
production, providing financial
support to the farmers in the
event of crop failure.
•Encourages farmers to adopt
progressive farming practices and
higher technology in Agriculture.
•Help in maintaining flow of
agricultural credit.
merely to the insured farmers,
but to the entire community
directly and indirectly.
Details of NCIS
•Covers food crops (cereals, millets, and
pulses), oilseeds, sugarcane, onion, and
potato, all annual commercial & annual
horticultural crops.
•Scheme extends to all States & Union
territories.
•The States/Union Territories once
opting for the Scheme will have to
continue for a minimum period of three
years.
•Covers farmers on compulsory basis as
well as voluntary basis. (Loanee & Non-
Loanee)
•All farmers including sharecroppers,
tenant farmers growing the notified
crops in the notified areas are eligible
for coverage.
Risks Covered by NCIS
•All non-preventable risks like:
Natural Fire and Lightning
Storm, Hailstorm, Cyclone,
Typhoon, Tempest, Hurricane,
Tornado etc.
Flood, Inundation and
Landslide
Drought, Dry spells
Pests/Diseases etc.
•Preventable risks like war,
Nuclear risks, Malicious Risks
etc are NOT covered.
 S Season Crops Premium rate
N.

1. Kharif Bajra & Oilseeds 3.5% of SI or Actuarial

rate, which ever is less
Insurance Key points
•In case of Loanee farmers the
Sum Insured would be at least     Other crops (cereals, 2.5% of SI or Actuarial
other millets & pulses) rate, which ever is less
equal to the amount of crop
loan advanced.

•Risk will be shared by IA and 2. Rabi Wheat 1.5% of SI or Actuarial

rate, which ever is less
the Government.

•The Scheme would operate     Other crops (other 2.0% of SI or Actuarial

on the basis of “Area cereals, millets, pulses
& oilseeds)
rate, which ever is less

Approach”.

3. Kharif & Rabi Annual Commercial Actuarial rates

annual Horticultural
crops
The claims paid were almost six
times the premiums collected in the
comprehensive schemes. They
would be more than six times higher
under the National Crop Insurance
Scheme
 Farm Income Insurance
Scheme (FIIS)
Why was this scheme
conceived?
•To provide income protection
to farmers.
•To Integrate mechanism of
insuring production as well as
market risks.
• To ensure minimum
guaranteed income.
Details of FIIS
•It was implemented on a
pilot basis during Rabi 2003-
2004.
•It was implemented in 18
districts of 12 states for wheat
& paddy.
•18lac farmers were covered
over an area of 1.9lac hectare.
•Premium amounting to Rs
14.1 Crore was generated
against the sum insured of Rs
239 crore.
 Premium generated (FIIS)
RABI KHARIF

•It was also implemented

during Kharif 2004 in 4 47%
selected states. 53%

•22.2lac farmers were covered

over an area of 2.02lac
hectares.
Farmers Covered (FIIS)
•Premium amounting to Rs.
15.68 crore was generated
against a sum insured of Rs.
RABI
177.56 crore. 45%
KHARIF
55%
 Suggestions made by loanee farmers for improving insurance
Sr. No. Response Percent
(a) Cover more crops 3.33
(b) Reduce premium rate 6.67
(c) Quick settlement of claims 56.67
(d) Gram Panchayat as a unit of loss assessment 1.67
(e) Insurance service at doorstep 1.67

Suggestions made by non-loanee farmers for improving insurance

Sr. No. Response Percent
(a) No awareness 22.22
(b) Lack of premium paying capacity 1.11
(c) Not aware of the facilities available 5.56
(d) Inadequate publicity 3.33
(e) complex documentation 2.22
(f) Lack of co-operation from the bank 1.11
(g) Difficulties in opening bank account 3.33
(h) Non-institutional source of loan 7.78
(i) More than one option 51.11
 THANK
SUMMARY
YOU
•Insurance Premium.

•Reliable irrigation reduces

risks.

•Positive and Stabilizing

Effect.

•Lack of participation from

various States.

•State Approach.

•“Adverse Selection”.

•U.S- Individual Approach.

•Emergence of Private sector

in agriculture insurance.