Getting farmers insured:
Progress and gaps
Pramod Aggarwal
CGIAR Program on Climate Change, Agriculture, and Food Security
BISA, CIMMYT, New Delhi, India

Number of people affected by weather-
related disasters (1995-2015)
Source: The human cost of weather-related
disasters:1995-2015. CRED and UNISDR, 2016

Natural disasters are increasing with time
Peter Hoeppe, 2016

Number of weather-related disasters
reported per country (1905-2015)
Source: The human cost of weather-related
disasters:1995-2015. CRED and UNISDR, 2016

This has led to a large interest in crop insurance:
Share of agricultural premium by region

Progress in Crop Insurance in India
80% farmers still uninsured
Yield (NAIS) and weather (WBCIS) index
schemes since 1985; Govt subsidy linked
to credit

Yet all stakeholders dissatisfied.
Why?
• All farmers: Governance, institutions, insurance literacy
• WBCIS farmers: weather variability- limited density of
weather stations; design of products, no coverage of
hailstorms, floods, post-harvest rains
• NAIS farmers: Crop-cutting limited and not scientific ,
compensation delayed and inadequate
• Industry: Frequent government intervention,
smallholdings, scattered, remote, transaction costs
• Government: subsidy, agrarian distress increasing

• Farmers satisfaction index-payment when due and in right
amount
• Industry: 70-80 % claim ratio
• Government: Premium subsidy not to increase
Improved triggers for weather insurance:
win-win products for farmers, industry and government

Improved triggers for weather insurance:
win-win products for farmers, industry and government
(work done in collaboration with AIC, Aon Benfield and Govt of Maharashtra
Term-sheet I II III IV
0 29.8 3.1 -0.4
0 0.0 58.3 -16.5
0 20.0 6.7 7.7
0 0.0 0.0 0.0
0 0.0 -43.3 0.0
0 0.0 0.0 0.0
Farmer
Satisfaction
Proposed
contract
0
10
20
30
40
50
60
70
80
90
100
0
1
2
3
4
5
6
7
Existing Contract Satisfaction Index-
farmer
Proposed Contract
Claimfrequency,%
SatisfactionIndex,Claimsratio
Satisfaction Index Claim ratio claim frequency, %
Revised deficit
rainfall triggers,
change over
existing contract

Farmer’s satisfaction with rainfall indices:
Example from Maharashtra
0
1
2
3
4
5
6
7
Paddy Pearl Millet Cotton Soybean
Farmer'sSatisfactionIndex
Current Index New Index

Research outcome of this initiative
• More than a million
farmers using this
product in one
season in 2015 in
Maharashtra state -
chronic problems of
climatic risks
• Continuous
engagement with
industry and
government in model
development and
evaluation

New crop insurance scheme in 2016
Protection
against all
risks
including
localized
ones
Area (village)
approach
All food and
commercial
crops
Farmers’
contribution
to premium
significantly
reduced
No capping
of premium
PPP model-
many private
insurance
companies
Use of
mobiles and
satellite
data for
quick
estimation
of losses
Target to
cover 50%
farmers by
2018
Prime Minister’s
Crop Insurance
Scheme
(PMFBY)

Research gaps to support this scheme
1. Yield index
 Identification of
vulnerable areas for
targeting crop insurance
 Smart sampling design
 Dispute resolution
2. Loss assessment
including mid-season
3. Weather-based index
design

Assimilating remote sensing
in crop models

NDVI at maximum crop growth stage in Vidharbha
Area-yield index: Yield loss
assessment at village/farmer scale

• High resolution, farmer specific
schemes- VIs, satellite weather,
crop models, crowd-sourced
info
• Engaging farming communities
in monitoring, reporting and
verification of crop insurance
• Bundling with disaster relief/
management
• Bundling with other risk
management initiatives such as
drought/flood tolerant varieties,
water management- climate
smart villages
Next steps for scaling out crop insurance
Products for comprehensive risk management
Climate-Smart Village components
(www.ccafs.cgiar.org)

Is insurance contributing to agricultural development?
Effects of rainfall insurance on agricultural investments (amount used)*
50%
41%
32%
23%
35%
26%
36%
43%
41%
48%
42%
52%
14% 16%
27% 29%
23% 22%
0%
20%
40%
60%
80%
100%
120%
Fertilizer Seeds Pesticides Bullock Hired labor Credit for
inputs
PERCENTFARMERS
More No change Less
*Work done at Andhra Pradesh, India by Cole et al. 2014

Technology may not be the key constraint in scaling out insurance
Top 10 reasons for dissatisfaction in unsatisfied farmers*
26.8
29.8
33.8
37.3
44.3
45.353.3
56.5
56.5
80.8
0
20
40
60
80
100
Types of Risks
Covered
Period of Risk
Coverage
Time Delay in
Claim
Settlement
Explanation on
WBCIS Policy
Quantum of Sum
Assured
Responsiveness
of Intermediary
Resolution of
Queries
Mechanisms for
Grievance
Redress
Convenience in
Enrollment
Location of
Weather Station
*Source: AFC, GOI, 2011