This webinar followed an interesting discussion we had in February 2016 on governments as important catalysts for developing the agriculture insurance market. In this second part we continued to touch upon the variety of interventions such as provision, administration and management of subsidies, support for developing infrastructure for effective implementation of insurance programmes, investment in collection and sharing of data and consumer education. In addition, the government's role in developing enabling regulations and using insurance as a part of their social protection and agriculture development agendas was discussed by experts from the World Food Program, HDFC Ergo General Insurance and BASIS/I4. Speakers: Tara Steinmetz (BASIS/I4), Mathieu Dubreuil (World Food Programme) and Vivek Lalan (HDFC Ergo General Insurance).

1. The role of governments in scaling up
agriculture insurance - Implementation
lessons

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3. The role of governments in scaling up
agriculture insurance - Implementation
lessons
3
Presenter:
Tara Steinmetz
BASIS/I4
Presenter:
Vivek Lalan
HDFC Ergo General Insurance
Presenter:
Mathieu Dubreuil
World Food Programme
Facilitator:
Pranav Prashad
Impact Insurance Facility
3

4. Governments are best suited to scale agriculture
insurance by:
- Creating a facilitative framework
- Providing premium subsidies
- Developing a platform for consumer education
- Direct “purchase” of insurance for safety nets
or catastrophic covers
Audience poll 1
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5. Lessons from R4 implementation
5
Mathieu Dubreuil

6. The R4 model Senegal
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Partners: CNAAS, PlaNet
Guarantee, saving groups
associations, La Lumière, IRI…
other rural development projects
2 index insurance products:
satellite and ground based
Vulnerable & food insecure
target population  Insurance
for Asset approach

7. In Senegal
The State subsidizes all ag. & livestock insurance premium by 50% + no
taxes
A rather strong risk management policy in rural areas, government has
joined ARC
As stakeholders we interact with:
‒ CNAAS: a public-private agricultural insurance company
‒ The Insurance Supervisor is very active and has a strong involvement
in the sector (CDPAI), and there is a microinsurance regulation (CIMA
code)
‒ The Meteorological Department
‒ Local government and some public agencies in coordination with
other initiatives and specifically on assets creation and targeting
‒ Index design team, including CNAAS / Met Services
The R4 experience with governments
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8. In Senegal, some issues encountered
Finding the right institutional linkage: which
ministry? (Agriculture for resilience? Environment for
climate change?)
‒ First focused on local partnership, then informal advisor and
now focus on climate change
Until recently, there was only little inclusion of the
insurance company by the Agriculture Ministry
‒ Putting CNAAS at the center should support scaling up
The R4 experience with governments
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9. The R4 model Ethiopia
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Partners: REST, ORDA, Nyala,
Africa Insurance, IRI
1 index insurance product:
satellite rainfall & vegetation
index
R4 asset creation and insurance
builds on PSNP
Vulnerable & food insecure
target population
 Insurance for Asset approach

10. In Ethiopia
The Ethiopian government is very efficiently
managing the PSNP, which gives a strong
coordination of all DRR / conditional transfers
activities
The inclusion of the IFA in the social protection
system is key for the sustainability of R4, which
requires a very close coordination with the
government and has not yet been achieved  This
takes time!
‒ Example of FFA 20 years ago, which were turned into the
PSNP
The R4 experience with governments
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11. Partnering with the government can take various ways, directly or
indirectly
Your project should be included in the government’s policy and
government should put in place the right framework to help you scale up
(regulation, subsidies, linkage with the other financial tools, value
chains…)
Obvious: the more the government is convinced, the more it will be active
and support measures to make the project / business sustainable
‒ This requires continuous training and awareness raising to many stakeholders
‒ Need to prove evidence of the impact and the cost efficiency of the approach
Should not be undertaken alone, coordinate at sector level
‒ Example of the CDPAI in Senegal
It does not mean you shall not advocate for improvements (coordination
with ARC, subsidies, role of Met Dept, business models of public
stakeholders…)
Key messages
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12. Where the government can play a key role for scaling up
and ensuring sustainability
Provide and adapt legal & regulatory framework
Enhancing data & information systems
Education and capacity building
Research & development (products)
Insurance distribution systems & financial transactions
platforms
Public premium subsidies
Catastrophic risk sharing / Risk financing
Key messages
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13. Government as a facilitator for crop
insurance in India
13
Vivek Lalan

14. 14
Indian agricultural landscape
Biggest employment sector in the country
Contributes 14% to GDP and employ
more than 50% workforce
Demographically broadest economic sector
playing key role in socioeconomic fabric
70% small and marginal farmers using old
and manual production techniques
Less than 40% of land is irrigated leading
to high dependency on weather

15. 15
Insurance process
De-risking rural credit- govt. support at each stage
Govt Notification
and guidelines
• Mandatory for
loanee farmers
• Covers all rural
financial
institution
Flow of Information
banks
• SLBC(State level
bankers
Committee)
send the
guidelines to
Nodal banks at
district
Product sales
• Conducting
bankers training
to explain
product features
• Banks debit
premium against
crop loan
disbursement
Benefits
• Hedging of banks portfolio and encourage agri loan
penetration
• Freeing up blocked capital

16. 16
Crop insurance
A key inclusion objective of Government since 1972
1965-1972
• GIC launched 1st ever crop insurance scheme in 1972 in 5 states
• Yield based cover
1972-1999
• Comprehensive crop insurance scheme launched in 1985 in 15 states
• Yield based, with two third risk sharing by Government
1999 -2007
• Agriculture Insurance Company (AIC) was formed and National Agriculture
Insurance Scheme(NAIS) launched
• Yield based and area approach
• Claim liability beyond 100% shared by Govt

17. 17
Crop insurance
National Crop Insurance Program emerges
2007-2009
• Pilot WBCIS(Weather Based Crop Insurance Scheme) launched
• Area approach, premium subsidy and claim liability with insurance company
• Private insurers allowed to participate
2009-2015
• WBCIS and MNAIS became full fledged scheme under (National Crop Insurance
Program) NCIP in 2013
• Area approach, premium based subsidy and claim liability with insurance company
2016>
• Pradhan Mantri Fasal Bima Yojana (PMFBY)- the flagship agriculture inclusion
scheme for the current Government launched
• Improved amalgamation of existing crop insurance schemes
• 16 implementing agencies allowed including 11 private players
• One scheme for the entire country, marked improvements both for insured
and insurers
Directional shift from claim subsidy mechanism to insurance solution

18. An effort to make scheme more beneficial as well as sustainable
Scheme based on core contours of yield based crop insurance scheme with some
additional covers
‒ NAIS and MNAIS redrafted to bring in improvements from farmers as well as insurers perspective
Only crop insurance scheme to be implemented in the country, thereby expanding
the universe of crop insurance
‒ All existing schemes folded under PMFBY, save for weather based niche schemes
Focus on making the scheme more affordable to the farmers
‒ Enhancement of level of premium subsidy up to 90%
Focus on making the scheme a sustainable insurance solution
‒ Complete shift from loss subsidy plan to an actuarially designed insurance scheme
Use of technology for crop yield estimations, minimising discrepancies in yield
estimations
‒ Involvement of insurance companies in yield estimations
‒ Use of Mobile phones for capturing crop cutting data
‒ Usage of remote sensing & drone based imagery for claim settlements
PMFBY
A new dimension to agriculture insurance
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19. With the launch of PMFBY, the crop insurance has almost become the third
largest product line in the non life insurance
Within one year of its launch the market potential has increased from ~ $ 810
million to over $ 2830 million
Crop insurance market post PMFBY
Emergence of crop insurance as a big product line
19
Year 2015-16
NAIS 323
WBCIS 277
MNAIS 208
Total 808
Year 2016-17
NAIS -
WBCIS 230
PMFBY 2600
Total 2830
Increase in average premium rates by almost 4 times due to shift to an actuarial
based pricing regime
Increase in average sum insured due to increased insured area and enhanced
scale of finance for the crops
Increased penetration of crop insurance from current ~ 20% to 35% due to
nationwide efforts by Government of India and State Governments and “one
scheme for the country”
( $ million)
Increase in market size
is primarily due to:
( $ million)

20. Increased government and insurance company’s efforts to promote the scheme
Total administration of government down to village level is engaged in motivating
farmers to insure themselves
Manifolds increase in marketing & promotion of scheme by insurance companies
and governments
Nationwide workshops held by insurance companies and local administration
jointly to educate farmers regarding concept of insurance
Use of social media introduced for first time to promote agriculture insurance
schemes
Improvement in the infrastructure related to crop insurance – Introduction of
agriculture help lines by insurance companies and government
Improvement in Automated Weather Stations Network (AWS) in country from 550
in 2006 to over 3000 in 2014 to more than 7500 in 2016
More transparency – Launch of farmer portal
Targeted penetration at 50% in next two years
Crop insurance market post-PMFBY
Increase in promotion efforts
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21. What is the best use of “smart” subsidies by the
Government?
- Subsidize premium
- Providing reinsurance covers
- Creating an infrastructure for data collection
and dissemination
- Providing consumer outreach
Audience poll 2
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22. Opportunities for government to encourage a
sustainable market for insurance and to
maximize development impact
22
Tara Steinmetz

23. Development objectives for investments in agricultural insurance
can typically be considered in two categories:
Dual objectives
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AFTER THE DISASTER BEFORE THE DISASTER
• After a major shock, farmers in
developing countries adopt
costly coping strategies, often
selling their remaining assets or
drastically reducing their
consumption
• These costly strategies can
contribute to the
intergenerational transfer of
poverty
• To mitigate their exposure to
risk, farmers often avoid risky,
but potentially profitable
investments
• Effective insurance can transfer
some risk away from the
farmer, enabling them to make
productive investments. In this
way, supporting insurance can
support inclusive agricultural
growth

24. 1. Ensure that the insurance products are of adequate
quality
‒ People must actually get protection from the insurance
(probability of payout in case of event)
‒ Behavior won’t change (increased investments) unless people
are actually receiving adequate protection
2. During initial phase, government can use subsidies to
encourage learning about the new product
‒ Subsidies can help to stimulate demand during the “learning
phase”
‒ But how you apply these subsidies matters
Government can play a role in working
toward these objectives
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25. Insurance is a technology with hidden attributes; consumers
can’t assess the quality of the insurance until after a disaster
occurs
When disasters occur every 5-10 years, that leaves a long gap
of uncertainty before the quality is revealed
Government can help to overcome these problems by
certifying if the product meets certain minimum quality
standards (as some governments do with seeds or other
technologies)
Government certification can help give farmers confidence
that the product has a certain minimum level of safety and
quality
Safe minimum standards for insurance
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26. If government funds are going to be spent, the contract
should be of sufficient quality and adequately targeted to
have significant development impact
One way to think of index-based agricultural insurance is like
any new technology (such as new seeds)
‒ Farmers are unfamiliar with the technology and how it works
‒ Subsidies or coupons allow farmers to “test” the new technology and
at lower personal risk
Short-term subsidies that encourage experimentation with
the product can create a market that remains even after
subsidies end
Smart subsidies
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27. What is the most effective way for governments
to promote creation of a sustainable market for
insurance?
- Bundling (credit with compulsory insurance)
- Integration into social safety nets
- Short-term learning subsidies
- Regulation and consumer protection
- None of the above
Audience poll 3
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28. To have the government support your project/business, it is
essential to provide evidence that your product/system brings
added value to target population and country. Training and
involvement are a key
Possible roles for government to play are becoming
increasingly clear, but more work remains to determine how
to best create a sustainable market for insurance and
maximize impact
Case for a separate body to regulate agriculture insurance
schemes. In addition to being the driving force, governments
should become active facilitators in educating and assisting
farmers, planning and execution of schemes
Concluding thoughts
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29. The role of governments in scaling up
agriculture insurance – Implementation
lessons
29
Presenter:
Tara Steinmetz
BASIS/I4
Presenter:
Vivek Lalan
HDFC Ergo General Insurance
Presenter:
Mathieu Dubreuil
World Food Programme
Facilitator:
Pranav Prashad
Impact Insurance Facility
29