1. An Overview of Rainfall
Insurance in India
LARGE POPULATION DEPENDENCE
In India, 70% Population Rural
Two Third Livelihood Depends On Agriculture And Allied Activities
120 Million Farm Holdings
107 Million Agriculture Labour
WEAK ASSET BASE
Average Size Of Operational Holdings : 1.32 Hectares
82% Holdings Small And Marginal (2 Or Less Than 2 Hectares)
Human Asset - Skill, Education, Health, Information
CLIMATE AND MARKET ABERRATIONS
60 Percent Agriculture Rain Dependent
Diversity Of Climatic Conditions
Occurrence Of Floods, Droughts, Pests
Logistics And Connectivity (600 Thousand Villages)
Market Vulnerability – Disadvantage In Price Realization
2. PRF Rainfall Index Insurance Program
A Rainfall Index Is Used As A “Proxy” Indicator The Amount Of Forage Production On Grazing Land And
Hayland.
A Rainfall Index Is Constructed For Each Approximately 8 Square Mile Grid In The State For Six Separate
Two Month “Index Intervals” In A Crop Year.
The Size Of Each Grid Is Determined By How The National Oceanic And Atmospheric Administration Reports
Rainfall Data In The United States.
Data On Daily Rainfall Have Been Collected For Each Grid Since 1948.
These Data Are Used To Construct A Rainfall Index For Each Two Month Period Where An Index Value Of
100 Represents Average Rainfall In Each Grid For The Index Interval Of Interest.
3. PRF Rainfall Index Insurance Program: Concepts
The Insured Crop Is Defined As Pasture, Rangeland, Or Forage.
There Are Two Crop Types: Grazingland And Hayland.
Grazingland Has An Established Stand Of Forage Suitable And Intended For Grazing By Livestock.
Hayland Has An Established Stand Of Forage Suitable And Intended For Haying.
4. PRF Rainfall Index Insurance Program: Acres to be Insured
A Producer Does Not Have To Insure All Of The Insurable Acreage Of Grazingland Or Hayland In A Grid.
The Producer Chooses The Acres To Be Insured.
Some Grazingland May Not Be Insurable (For Example, The Area May Be Too Steeply Sloped, Or Too Far
From Water For Livestock To Graze It).
Some Land In A Hayland Area May Also Be Uninsurable (Because It Is Not Suitable For Mechanical
Harvesting).
5. PRF Rainfall Index Insurance Program: General Principles
Each Grid’s Rainfall Index Is Normalized So That The Value Of 100 Represents Average Rainfall.
(Historical Values For Each Grid’s NDVI Are Available On Rma’s PRF Website).
A Producer Will Receive An Indemnity Payment When The Rainfall Index Value For The Grid
Falls Sufficiently Far Below Its Average Value In Each Index Interval Which The Producer’s
Has Chosen To Insure.
6. • Vital For Stable Agricultural Growth And Risk Management
• Modalities Of Crop Insurance
Individual Approach
• Necessitates Reliable And Accurate Data Of Crop Yields Of Individual Farmers For A Sufficiently Long Period
Moral Hazards
• Homogenous Area Approach
Comprehensive Crop Insurance Scheme (Ccis) 1986
• National Agricultural Insurance Scheme (Nais) 1999-2000
• Agriculture Insurance Company Of India Limited (Aic)
Incorporated In December 2002
Authorized Share Capital : Rs 15 Billions (USD 375 Millions)
Paid-up Capital Rs 2 Billions (USD 50 Millions)
Share Holders Lead Public Insurance Companies And NABARD
• Rainfall Insurance
Genesis of Crop Insurance in India
7. National Agricultural Insurance Scheme (NAIS)
To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified
crop as a result of natural calamities, pests & diseases.
To encourage the farmers to adopt progressive farming practices, high value inputs and higher technology in
Agriculture.
To help stabilize farm incomes, particularly in disaster years.
8. PRF Rainfall Index Insurance Program: Indemnities
The Final Grid Index Value For A Specific Interval Is Determined By The Federal Crop
Insurance Corporation Using The Actual Rainfall Observed For The Grid During The
Interval.
An Rainfall Index Value Of 100 Represents The Average Value For The Index In The
Interval Of Interest.
An Rainfall Index Value Of Less 100 Represents A Lower Than Average Value For That
Interval.
The Final Grid Index Value For An Interval Can Only Be Calculated After The End Of The
Interval.
9. PRF Rainfall Index Insurance Program: Indemnities
The Trigger Grid Index = 100 X The Coverage Level (Selected By The Producer).
An Indemnity Payment Is Made If The Final Grid Index (Determined By Rma) Is Less Than The Trigger Grid
Index.
Indemnity Payment = Policy Protection Per Payment Calculation Factor (Pcf), where
Pcf = [Trigger Grid Index – Final Grid Index]/ Trigger Grid Index.
Insurance Payments Are Relatively Timely As Final Grid Indexes Can Be Computed Immediately After Each
Index Interval Has Ended And No Information About Forage Yields Has To Be Provided By Producers.