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CROP INSURANCE

1

INTRODUCTION OF CROP INSURANCE

The name of this insurance itself tells that it is related to the

agricultural producers. It includes cultivators, ranchers, and other related

people who protect themselves from the loss of their harvests and crops. It

can be due to some natural tragedies like floods, drought, and sleet. It also

include the financial loss occurred due to fall of agricultural products in the

market. The two parts of crop insurance are crop-defer insurance and crop-

profits insurance.

There are two sub categories of crop-defer insurance: (1) crop-sleet

insurance (2) Multi-threat crop insurance

Crop-sleet insurance is normally accessible from private insurance

companies. The reason is that the sleet is a slight danger which crops up in

limited small areas. The build up losses be likely not to crush the wealth

assets of private insurance companies. This type of insurance first started in

Germany and France in 1820s.

Multi-threat crop insurance is a mutual form of crop ±sleet insurance

with price insurance. It gives the coverage to turn down prices which take

place all through the rising period of crops.





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Crop Insurance Basics

The most common crop insurance product is the Multiple Peril Crop Insurance policy.

If you are getting into the farming business for the first time,

you will need to learn about crop insurance. A trained crop insurance

agent is a valuable asset for you when purchasing a policy, asking

questions or filing a claim. The United States Department of

Agriculture's Risk Management Agency oversees the Federal Crop

Insurance Corporation, which in turn provides the Multiple Peril Crop

Insurance policy, the most widely used crop insurance policy in the

United States.

y Insurance Units

You must determine what type of unit you will use for your crop

insurance policy. The unit type is a measurement of the amount of land

you use, and it is used by the insurance company to determine your

premium. The most common unit type is the optional unit, which

essentially can be used for any amount of land as long as it is not high-

risk land and all your units are in the same mapping area. An alternative

is the basic unit. If you farm only one area in a county, this might be

your best option because there is a 10 percent premium discount for

basic unit users. Enterprise units are combinations of basic units and

provide additional discounts for certain crops.

y Yield Variation

Crop insurance is designed to pay the difference between your

expected crop yield and the actual yield. Therefore, the variation



CROP INSURANCE

between these two numbers dictates how much insurance coverage you

need. Theoretically, if you never have any yield variation, you need no

insurance, though this is never the case. A consistent yield variation

minimizes any adverse financial impact on your business by helping you

purchase adequate insurance without over-insuring.

y Yield's Effect on Premium

Generally, if you have a high crop yield you will pay a low

insurance premium. This has been a standard underwriting principle

since the 1980s, when it was determined that farms with the highest

yields often had the lowest loss ratios. Since that time, producers like

you must prove your yields to the insurance company in order to get the

maximum coverage available.

y MPCI Subsidization

The Multiple Peril Crop Insurance program is highly subsidized

by the federal government. Typically, the insurance program pays out

more than $1 in losses for every premium dollar it takes in, and the

government finances the balance. This means that chances are high that

you will earn more money in claims than you pay in premiums. This

provides you a sound financial incentive to purchase this policy sinceyou may actually profit from it while being protected against losses.

y Producer Responsibilities

When you purchase a Multiple Peril Crop Insurance policy, you

must satisfy your responsibilities as a crop producer. As a policyholder,

you are expected to report your acreage accurately, as well as your

yields if you opt to do so. You must meet all policy deadlines and pay

your premiums when they are due.



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Crop Insurance Information

Crop insurance helps make return on investment more predictable for farmers.

Farming always has been a risky business. Many factors the farmer

has little control over, such as weather and vermin, can destroy a cropand put the farmer in a bad financial situation. Crop insurance is

available to farmers so they can receive compensation in the event of a

poor crop season.

y Premiums

Crop insurance, like all kinds of insurance, is a form of risk

management. Farmers do not want to lose money when their crops fail as

a result of bad weather, pests or other unforeseen factors. Farmers protecttheir investment by paying insurance premiums so they can receive a

payout from their insurance company if their crops fail.

The premiums that farmers pay vary based on several factors. For

example, under the Group Risk Income Plan in Illinois, corn farmers

could pay between $29.58 per acre and $67.83 per acre in 2010,

depending on the county where their farms were located. Determining the

premiums for crop insurance is complicated. Farmers must take into

consideration the county they're from, the crop they're growing, their yield, the type of insurance plan they want and what percentage of their

yield they want insured.



CROP INSURANCE

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y Guidance

Crop insurance companies provide farmers with advice on how to

reduce risk. This consultation service is helpful for new farmers who

are still learning the basics of running the farm as a business.

y Federal Involvement

The federal government requires crop insurers to insure at least 80

percent of all the insurable land. Private institutions provide crop

insurance services, but the federal government provides underwriting

services.

y Types

Farmers might receive coverage for drought, excessive moisture,

insects and disease. Group risk plans cover entire counties in the event

of poor crop seasons. Some use the vegetative index, which is the

amount of green and healthy vegetation compared with the normal

amount of vegetation, based on satellite images.

Farmers can receive coverage that is based off a percentage of the

average gross income brought in by the farmer. Farmers can receive

compensation for the amount of lost crop compared with the amount

of money the farmer pays to grow the crops.

y Requirements

In order to be eligible for crop insurance, the farmer must report his

acreage accurately. He must pay his premiums on time. He also must

immediately report any losses in crops when they occur.



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7

History of Crop Insurance

Crop insurance protects farmers from catastrophic loss.

Most types of insurance have been a private industry response to a need

to protect individuals or businesses from a certain type of financial risk.

Crop insurance is different, because the federal government was the catalyst

for its creation. In fact, government regulation has been a vital part of the

development of crop insurance over time.

1. Triggers

Crop insurance was created as a response to the Dust Bowl and Great Depression.

The crop insurance program was a response to two situations that

severely affected agriculture in the United States. The first was the Great

Depression that devastated the world's economy from 1929 through the

1930s. The second was the period of drought and dust storms of the

1930s, called the Dust Bowl. Congress authorized the first crop insurance

program as a means of protecting agriculture from these types of

catastrophes.



CROP INSURANCE

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2. The First Crop Insurance

The first crop insurance was written in 1938.

In 1938, the Federal Crop Insurance Corporation began to carry out

Congress' mandate to provide insurance for farmers against catastrophic

crop loss. In the beginning, this was a very limited type of coverage that

applied only to certain types of crops and only in certain areas. At first,

the program was an experiment.

3. Expansion

The Federal Crop Act of 1980 was designed to expand coverage to more farmers.

The program continued in its experimental role for decades, until

another act of Congress triggered further change. In 1980, Congress

passed the Federal Crop Insurance Act of 1980, which expanded both thecrops covered and the regions of the country where coverage was

available. This expansion encouraged greater participation by farmers in

the program.



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. More Changes

A 1994 act made participation mandatory under certain circumstances.

Despite the change in 1980, the number of farmers taking advantage

of crop insurance didn't rise to the levels Congress wanted for several

years. However, starting in 1988, various weather problems causedfarmers to ask for emergency aid in several years. Seeing that as

competition to the crop insurance program, Congress crafted the Federal

Crop Insurance Reform Act of 1994 which, among other things,

mandated participation in the crop insurance program for farmers with

certain types of loans or receiving certain disaster assistance.

5. Beyond 1994

Now even livestock can be covered.

In 1996, the mandate was removed, but farmers who waived crop

insurance also opted out of disaster relief programs. In 2000 Congress

opened up the program to more private enterprise and allowed new forms

of crop insurance, including livestock coverage. This created expansion

of the program that continues to the present.



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ADVANTAGES OF CROP INSURANCE

The important advantages of crop insurance are:

1. Provide security for agricultural production :

The crop insurance not only protection the loss of crops but also

caution the farmers to keep away the crops from diseases, by using

pesticides.

2. Provides rights to farmers :

The crop insurance provides indemnity against damages or

losses to crop which now becomes a right of farmers.

3. Certainty of payment :

Where the loss arises, the insurance company bounds to make

the payment of claims, whereas the government extends assistance to

the farmers depending on the economic conditions of farmers.

4. Stability to agriculture economy

crop insurance is a God gift to the agricultural economy, which

helps substantive production in the agriculture sectors.

5. Strength to basic structure of agriculture

The crop insurance provides strength to basic structure of

agriculture since it gives strength to irrigation scheme and water

supply sources, conservation of soils, forests, etc.

6. Increase in income

In the case of damages to crops, the farmers cannot bear the

expenses on cultivation, and for paying rents and taxes. But cropinsurance provides a regular income and extends supports to increase

purchasing power of the farmers.



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7. Assistance to industries

Indirectly, the crop insurance is a support to agriculture based

industries. In the absence of crop insurance, these industries, these

industries would have been facing difficulty in getting the regular

supply of raw materials.

8. Refund of agricultural credit

Crop insurance is an important source of income to the farmers.

This source of income has facilitated in returning the loan and taxes to

the extent.

9. Acts as a coordinating agency of the government

Crop insurance is a step forward to increase the agriculturalproduction. Its acts as a coordinating agency of the government in the

development of agriculture in the country.



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TYPES OF CROP INSURANCE

Crop insurance offers coverage in case of disasters.

Crop insurance is a specific type of insurance for farmers who depend

on the success of their crops to make money from year to year. While the

success of crops depends on farmers and what work they do, crops are

also subject to many factors, especially weather conditions, changes in

climate, and environmental factors like insects. Crop insurance allows

farmers to plant and tend crops more confidently in areas where loss due

to weather may be an issue.

y Crop Hail and MPCI

MPCI stands for multiple peril crop insurance. Crop hail insurance

protects only against hail. Hail is typically not a problem in off seasons,

but when plants are young or when fruit and grains are fully developed,

hail storms can cause severe, widespread damage that cannot be protected

against. Farmers in areas subject to hail storms often use this insurance.

MPCI is a more expensive type of insurance that covers most natural

disasters.

y GRP

GRP stands for Group Risk Protection. This is similar to MPCI

insurance, but instead of looking at a particular farm and how much

damage has been done (based on yields in previous years), GRP looks at

the entire county and adjusts coverage accordingly. This is useful in



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counties that are hard-hit by weather events in growing seasons, and

useful for farmers since they tend to cost less than MPCI.

y CRC

CRC, or crop revenue coverage,bases insurance payments on therevenue that the crops produce. The insurance kicks in when crop

revenue falls to a certain point below the average level, such as 60 or 50

percent. There are different variations on this insurance, which allow

farmers to receive a minimum amount of revenue no matter what.

y CAT

CAT stands for catastrophic coverage, which covers losses below 50

percent of the farmer's average yield. This type of insurance was createddue to legislation changes in 1994, and farmers must pay an

administrative fee for this insurance. However, it is designed to cover

nearly any major event that may occur, related to weather, pests, fire and

any other circumstances.



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HOW TO BECOME A CROP INSURANCE AGENT

Becoming a crop insurance agent can lead you to a career that is both

exciting and very lucrative. The process is similar to becoming any other

type of insurance agent. Crop insurance agents are simply more focused and

better trained to market and sell a specific type of insurance to farm owners

that will help protect against destroyed or unsold crops. Crop insurance

agents should familiarize themselves with the financial intricacies of a

farmer's life. According to the National Crop Insurance Services, "a

thorough understanding of agricultural economics and the agrarian lifestyle

is extremely beneficial."

Instructions

y Educate yourself about your community's farming history, paying

particular attention to any trends related to the success or failure of

local farmers. Learn the basic fundamentals of how crops are grown,

harvested, packaged, and sold. By understanding the challenges and

financial risks faced by today's farmer, you will be able to relate to

prospective clients, and make more sound recommendations regarding

relevant crop insurance policy options.

y Get your insurance license. Before you can legally sell an insurance

policy, you must be properly licensed by your resident state. To get

properly licensed, you must pass a state-approved exam that tests your

knowledge of the insurance rules and regulations set by your state.

Some states allow prospective insurance producers to study for this

exam on their own, but others may require you to attend an in-person

class.

y Get appointed with an insurance company. After you obtain your

state's insurance producer's license, you must get appointed with

insurance companies that provide crop insurance. Choose insurance

companies you would feel comfortable representing and contact their

agent contracting departments. Request that a new agent appointment

kit be mailed to your home. When you receive the package, complete



CROP INSURANCE

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and return the appointment documents along with a copy of your new

insurance license.

y Learn the product. Once you are appointed with your chosen

insurance carrier, contact the sales department to request marketing

material for the crop insurance products. Examine the material tobecome familiar with the specific coverage provided by the policy, as

well as any limitations contained within the contract.

y Prepare to sell. Considering your available marketing budget and local

resources and decide on the best way to begin marketing and

advertising your carrier's crop insurance product line. Prepare and

memorize a sales script that you can use with potential clients, as well

as a telephone calling script that you can use for cold-calling

prospects.

Tips & Warnings

y Many insurance carriers have pre-approved marketing material for your

advertising efforts. Also, some insurance companies will allocate a certain

amount of money that new agents can use to help pay for marketing

campaigns. Ask your carrier's agent support team if any marketing

assistance is available.

y It is illegal to advertise or solicit the sale of insurance products without being

properly licensed by your resident state. Severe penalties may be imposed if

you are caught selling insurance without an active license.



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How to Sell Agricultural InsuranceBeginning a career as an

insurance agent is no easy task,

but the proper training and

determination can lead to a

lifestyle that exciting and

increasingly profitable. If you

live in an area of the country that

is largely dedicated to farming

and agriculture, focusing on

specific types of insurance sales

that are attractive to people in those geographic regions can result in a

successful insurance practice. The steps to becoming an agriculturalinsurance salesman are not much different than those to become any other

type of insurance agent. However, successfully selling agricultural insurance

will require a significant familiarity with farming, crops, and other facets of

the industry. In addition to learning your state's insurance regulations, you

will need to become familiar with farming processes, the machinery used to

plant and harvest crops, and the potential financial liabilities faced by those

in the industry.

Instructions

y Get a state insurance producer license. Every state requires you to

obtain an insurance producer license before you are permitted to

solicit insurance policy sales. Many states allow you to study for the

insurance producer licensing exam at home, then take the test when

you feel prepared. However, other states require participation in

classroom educational sessions that will include the producer

examination at the conclusion of the course. The final exam is

designed to test your comprehension and knowledge of your state's

insurance laws.

y Get errors and omissions insurance. Every insurance producer must be

protected by an errors and omissions policy, commonly referred to as

E&O. This is a professional liability insurance policy that is



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specifically geared toward protecting insurance agents in the event of

a mistake or misrepresentation. Your state's insurance department will

provide you with a list of E&O carriers after you successfully obtain

your producer license. Contact these carriers to request details about

available policies for new agents, then choose the one most properlysuited to your needs and available budget.

y Get appointed with insurance carriers. In order to sell agricultural

insurance, you must get contracted with the companies that provide

those products. Contact insurance companies that sell agricultural

insurance products in your area and request agent appointment kits.

The carriers will mail you packages that contain information about the

insurance company as a whole, plus agent-specific materials that

detail the benefits of working with that particular company. Completethe agent appointment paperwork and submit it to the insurance

carrier along with copies of your new insurance producers license and

E&O policy declaration page.

y Learn about the agricultural industry. It is much easier to build rapport

with potential new insurance customers when you can demonstrate

that you truly understand the difficulties they face. By immersing

yourself in the farming industry, you can learn exactly what it means

to work in the field, and just what concerns are most prominentamong the farmers in your community. Recognizing the challenges

faced by your potential customers will also make it easier for you to

recommend more appropriate products and services to protect them.

y Advertise your products and services. Once your appointments have

been successfully processed, you must inform the public that you are

able to assist them with their agricultural insurance needs. Consider

your available budget and implement a marketing campaign that

maximizes your resources.



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Tips & Warnings

y Ask your insurance carriers for a list of available marketing material for

their agricultural insurance products. Most carriers will provide you with

these materials for no cost, and some will even contribute money towardyour advertising efforts.

y Do not attempt to solicit the sale of insurance products without the proper

state insurance producer license. This is illegal and will result in severe

penalties and fines.



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T HE ROLE OF INSURANCE IN FINANCING AGRICULTURE

How important is crop insurance to farmers? Consider the record freeze of

January 2010 that damaged citrus, strawberry and tomato crops in Florida.

The insured liability for the Florida crop losses was $3 billion. Without

insurance, agribusiness could not exist.

y Covered Losses

Fortunately, all the loss in Florida was covered by insurance, according

to Bob Parkerson, president of National Crop Insurance Services. He

promised timely settlements so farm operations could continue.

y Steps to Take

Parkerson outlined steps growers can take to maximize the value of

insurance adjustments:

--Contact the agent within 72 hours of sustaining crop damage.

--Continue to protect and care for the damaged crop.

--Harvest as much as possible.

--Don't destroy damaged crops without an agreement from the insurer.

y Tailoring Insurance

Insurance for agriculture financing is specific to individual crops. While

a spring frost may not significantly damage a hay crop, early spring fruit

crops are highly vulnerable to freeze damage.

y Insurance Subsidies

Most crop insurance is subsidized by the government through the Risk

Management Agency of the U.S. Department of Agriculture. An

agreement between national insurers and the government determinespremium costs and operating expenses. Farmers now worry that federal

budget cuts proposed as of January 2010 will adversely affect them.



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y Assistance

Help for growers making crop insurance decisions is available online

from the Agricultural Extension Service. Other good sources of

information are local banks and farm organizations.



CROP INSURANCE

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NEW INSURANCE LETS FARMERS DOWN

COME winters, farmers in 50 districts of

the country will be covered by an experimental

crop insurance scheme by the Centre. The new

scheme is a modified version of the current

programme with new features like providing

indemnity and advance relief to farmers. The unit

area for the new insurance scheme has been

reduced from a district to a panchayat. Farmer

unions said the government should have covered

individual farmers.

Unions demand individual coverage

The Cabinet Committee on Economic Affairs on September 16 approved the

implementation of the Modified National Agricultural Insurance Scheme

(MNAIS) in 21 states on a pilot basis.

If MNAIS, with a budget of Rs 358 crore, is successful it will replace the

ongoing National Agriculture Insurance Scheme (NAIS).

Under the new compulsory insurance farmers can get loans and advancerelief of 25 per cent of the insured sum before final settlements. This will

avoid hardships to the farmers, an agriculture ministry official.Calculating

insurance claims on the quantum of crop failure at the panchayat level rather

than at the district level will ensure better reach to farmers, the official

added.



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CROP INSURANCE IN INDIA

Crop insurance is one of the various types of insurance that are

offered to the people. This insurance is directed to the farmers and

agriculturists. This Crop insurance scheme has been going on since the timeof Kharif 1985. This insurance offers financial assistance for risk

management in agriculture.

This insurance policy is a relief scheme for the farmers whose crops

get spoiled during natural catastrophe. The insurance amount that is offered

to the farmers is equal to the loan amount that has been disbursed to them. A

certain amount of premium is charged against the crop insurance.

The loss that is incurred due to natural calamities is met by the

Government of India. It is to be noted that the insurance covers only one

crop. The crop insurance does not cover financial assistance to multiple

crops.

Experimental Crop Insurance Scheme is offered to the marginal

farmers. This was introduced during the 1997 to 1998 rabi season by the

Government of India. Large numbers of farmers are included under this

scheme. Financial security is offered to the farmers by this crop insurance.

Crop insurance services are offered to the farmers for better production

of the crops and introduction of modern technologies. Top quality services

are rendered to the farmers and clients. The risk factor that is involved with

the production of the crops has reduced much because of the introduction of

this insurance policy.



CROP INSURANCE

23

W HAT IS K HARIF AND RABI CROPS

Rabi ( Also called Rabbi ) and Kharif are the two agricultural crops

related words that have come with the Mughals in the Indian subcontinent

and are widely used ever-since.

1 ) The term Kharif means "autumn" in Arabic. Kharif crops is the autumn

harvest ; but better know as the monsoon crops in Indian sub

continent(India, Pakistan Srilanka, Nepal). Kharif crops are usually sown

with the beginning of the first rains towards the end of May in the state of Kerala during the advent of south-west monsoon season.

As the Monsoon rains advance towards the north India the sowing

dates are accordingly vary and and it is done in July in North Indian states

These crops are totally dependent on the quantity rain water as well its

timing .Too much , too less or at wrong time may lay waste the whole year's

efforts .The harvesting begins with Diwali days or slightly earlier during

Vijayadashmi days.Since this period coincides with the beginning of

Autumn / winter in the Indian sub-continent It is called " Kharif period " and

the crops are "Kharif crops".



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2) The Rabi crop is the spring harvest (also known as the "winter crop") in

Indian subcontinent. The term Rabi means "spring" in Arabic, and it

coincides with mid April to Mid June .

To avoid any confusion == let us remember that these crops are taken

AFTER THE DEPARTURE OF MONSOON RAINS FRON THE INDIAN

SUBCONNENT .

The main source of water for these crops is the the water that has

percolated in the ground during the rains .So a good or bountiful rain MAY

spoil Kharif crops BUT it is always good or a BOON to Rabi crops.The

seeds are sown after the rains have gone and harvesting begins in April /

May i.e. totally dry season in India .Rabi crops require water from other sources as wells,lakes and rivers .



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CR OPS COVERED

Sr.no During Kharif 2008 Sr. no During Rabi 2007-08

1 Rice 1 Rice

2 Jowar 2 Jowar (UI)

3 Bajra 3 Maize

4 Maize 4 Greengram

5 Blackgram 5 Blackgram

6 Greengram 6 Groundnut

7 Redgram 7 Sunflower

8 Soyabean 8 Chillies

9 Groundnut 9 Onion

10 Groundnut (UI) 10 Mango

11 Sunflower 11 Bengalgram

12 Castor

13 Sugercane

14 Sugarcane

15 Cotton

16 Cotton (UI)17 Chillies (I)

18 Chillies (UI)

19 Banana,

20 Turmeric



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SEASONALITY DISCIPLINE:

a. The broad seasonality discipline followed for Loanee farmers will be as

under

Activity Kharif Rabi

Loaning period April to September October to

March

Cut-off date for receipt of Declarations November May

Cut-off date for receipt of yield data January / March July /

September

b. The broad cut-off dates for receipt of proposals in respect of Non-loanee

farmers will be as under:1. Kharif season: 31st July

2. Rabi season: 31st December

However, seasonality discipline may be modified, if and where necessary in

consultation with State / UT and the G

FARMERS COVERED

Crop Insurance is compulsory for all Loanee Farmers and voluntary for

Non-Loanee Farmers.

RISKS COVERED & EXCLUSIONS:

Comprehensive risk insurance will be provided to cover yield losses due to

non preventable risks, viz.:

y Natural Fire and Lightning

y Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado

etc.

y Flood, Inundation and Landslide

y Drought, Dry spells

y Pests/ Diseases etc.

Note: Losses arising out of war & nuclear risks, malicious damage & other

preventable risks shall be excluded.



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Premium subsidy:

50% subsidy in premium is allowed in respect of Small & Marginal

farmers to be shared equally by the Govt. of India and State/UT Govt. The

premium subsidy will be phased out on sunset basis in a period of three tofive years subject to review of financial results and the response of farmers

at the end of the first year of the implementation of the Scheme.

Premium Rates:

S

N.

Season Crops Premium rate

1. Kharif Bajra & Oilseeds 3.5% of SI or

Actuarialrate, which ever is

less

Other crops (cereals, other millets &

pulses)

2.5% of SI or

Actuarial

rate, which ever is

less

2. Rabi Wheat 1.5% of SI or

Actuarialrate, which ever is

less

Other crops (other cereals, millets, pulses

& oilseeds)

2.0% of SI or

Actuarial

rate, which ever is

less

3. Kharif &

Rabi

Annual Commercial annual Horticultural

crops

Actuarial rates



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CROP INSURANCE COMPANIES IN INDIA:Agriculture Insurance Company of India Ltd. (AICI)

Promoted by:

1. General Insurance Company (GIC)

2. National Bank for Agriculture and Rural Development (NABARD)

Four other Insurance Subsidiaries are:

1) National Insurance Company Ltd.

2) New India Assurance Company Ltd.

3) Oriental Insurance Company Ltd

4) United India Insurance Company Ltd.

ICICI Lombard in collaboration with BASIX ± provided first ever Weather

Insurance. Iffco Tokyo has recently entered into the weather insurancebusiness.

Agriculture Insurance Company of India

Agriculture Insurance Company of India

Incorporated on 24-Nov-00

Address

13th Floor, ³AMBA DEEP?

14,Kasturba Gandhi Marg,

Connaught Place,

New Delhi - 110001,INDIA

Phone Nos:(011) 46869800

Fax No:(011) 46869815

Website: www.aicofindia.org

Tel. No. (011) 46869860

Fax (011) 46869854, 46869855

Toll (011) 46869860

EMail ID [email protected]

Website www.aicofindia.org

Chat NA

Agriculture Insurance Company of India Company Details, Profile, Address



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About Agriculture Insurance Company of India Limited

An Insurance company formed in order to serve the needs of farmers and

other people involved in agriculture, the Agriculture Insurance Company of

India Limited aims to make rural India move a step forward towards asustainable actuarial management. Incorporated with the general budget of

the financial year of 2002-03, AIC has now taken over National Agricultural

Insurance Scheme and also aims to carry out other insurance businesses

directly or indirectly related with agriculture or agricultural aided activities

in future.

AIC is a public undertaking fulfilling the needs of around 20 million farmers

throughout the country, currently providing an area and weather based crop

insurance programs to almost 500 districts of India. It has around 17 regional

offices in the country with their headquarters situated at New Delhi. The

company aims of highlighting the economic growth rate of the country by

bringing financial stability in the rural part of the country. It is also allowed

to offer innovative rural oriented and farmer friendly policies in order to

ensure protection from natural perils and risks in agriculture related

business.

It was incorporated with an authorized share capital of Rs. 1500 Crores andpaid up share capital of Rs. 200 Crores. It has some other companies like

GIC, NABARD, National Insurance Company Limited, the New India

Assurance Company Limited, Oriental Insurance Company Limited and

United India Insurance Company Limited who work as promoters as well as

organization share holders of the AIC. The company is presently controlled

by the Ministry of Finance, Government of India and is supervised by the

Insurance Regulatory and Development Authority, Hyderabad.



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Product and Services

The company at present offers the following schemes :

y NAIS- National Crop Insurance Scheme

y WBCIS -Weather Based Crop Insurance Scheme

y Wheat Insurance (Weather & Biomass)

y RabiWeather Insurance

y Mango Insurance

y Poppy Insurance

y USBY - Uttarakhand Seb Bima Yojana (Apple Insurance)

y Potato Insurance

y Grapes Insurance

y Varsha Bima/Rainfall Insurance

y RISC - Rainfall Insurance Scheme for Coffee Growers (Coffee

Insurance)

y Bio-Fuel Tree/Plant Insurance

y Pulpwood Tree Insurance

y Coconut Insurance

y Rubber Insurance



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POTATO CROP INSURANCE

1.

Unique parametric insurance based on named perils linked to plantpopulation

2. Available for potato growers contract farming in the potato growingareas

3. Maximum liability is Rs. 25,000 per acre

4. Based on partnership model of ³grower ± producer ± financier ± insurer´

This insurance policy is applicable to Potato crop cultivated by thefarmers in different Potato growing parts of the country.

Scope of Cover This is an input cost cover starting from a week after planting till 7

days before harvesting. The insurance is by way of indemnity againstpecuniary loss suffered by the insured in respect of the cost of inputs onaccount of the loss or damage (death/ total damage of the plants leading to

reduction of the plant population below the threshold number) due to thehappening of the insured perils. It shall not apply to the loss of yield/production of potato crop resulting from the insured perils. The policyshall cover and indemnify the insured (in accordance with the claimassessment procedure) in the event of damage of potato crop leading toreduction of plant population below a threshold limit, occasioned by naturalcalamities like Flood, Cyclone, Storm, Frost and Pest & Diseases (except



CROP INSURANCE

32

Late Blight) etc. either in isolation or concurrently during the period of insurance.

Claim Procedure

On happening of any loss or damage, the insured shall give notice tothe company within 48 hours (directly or through the financing bank or through the participating organization) and subsequently shall submit a

claim in writing within 15 days after loss or damage. The insured shalltender to AIC all reasonable information, assistance and proofs inconnection with any such claim. The total cost of inputs per unit area of insurance covered under this Policy shall be deemed to be the amount asspecified in the policy, which shall be deemed to have been incurred at apercentage corresponding to the stage of cultivation. The amount of lossassessable under this policy shall be such sum as is arrived at after applying

the percentage of death/ damaged plants per acre to the amount of the cost of inputs per acre, at the stage at which the insured peril causing the lossoperates, subject to the terms, conditions, salvage, excess and any other deductions.The insured shall be required to furnish proof of insurance andany other document / proof specifically requested by AIC for the settlementof the claim.



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33

W HEAT INSURANCE POLICY (Based on Temperature & Biomass/Crop Vigour)

1.Unique Index insurance product based on biomass (Normalized DifferenceVegetative Index) and weather parameters like temperature & rainfall

2. Available in Haryana & Punjab presently.

3. Maximum liability is Rs. 8,000 per acre with flexible premiums

Wheat Insurance Policy is a unique technology based insurance

product combining crop vigour/ biomass (NDVI) and weather (temperature)parameters. The NDVI component of the cover measured at peak cropvigour stage provides effective risk management aid to those wheat farmerswho are likely to be impacted by poor growth of the crop arising out of non-preventable natural factors / incidences.

The most important benefits of this insurance linked to biomass trigger

are:Trigger events could be measured using high technology standards

based on satellite imagery from remote sensing technology. These could beindependently verified & measured and accurate. It allows for speedysettlement of indemnities, even before the crop is ready for harvesting.



CROP INSURANCE

34

Coverage

Agriculture Insurance Company hereby agrees, subject to the terms,conditions and exclusions herein contained, or otherwise expressed herein tocompensate the insured, in the manner specified herein, against thelikelihood of diminished wheat output/yield resulting from a) lower biomass/ crop vigour as measured using satellite imagery in terms of Normalized

Difference Vegetative Index (NDVI) within the specified taluka / block preferably during the month of February (corresponding to peak crop vigour,subjected to availability of satellite image) and / or b) high temperature (indegree centigrade) consecutively for specified number of days abovespecified levels in the 1st and / or 2nd fortnight of March as measured atR WS.

Period of Insurance:The insurance operates during peak wheat crop growth stage, more

particularly during parts of February and March

How claims become payable:

In the event that, in the geographical location and during the time

period specified in the Schedule to this policy, the current NDVI (scaledvalue) falls short of the specified trigger level,the benefit payable to the insured shall be a sum specified corresponding tothe trigger level; and/or In the event that, in the geographical location andduring the season specified in the Schedule to this policy the maximumtemperature of specified number of consecutive days, as recorded at R WS ishigher than the specified trigger levels during 1st fortnight and / or 2ndfortnight, the benefit payable to the insured shall be a sum specifiedcorresponding to the trigger level.

Premium

Premium chargeable would be statistically/actuarially calculatedbased on the geographical area, the triggers specified and the biomass and

temperature patterns of the specified geographical area in the historicalperiods.



CROP INSURANCE

35

CROP INSURANCE SCHEMES IN INDIA:In order to provide a boost to the agriculture in India, a number of

experimental crop insurance schemes have been introduced in the country.

Pilot Crop Insurance scheme:

This was introduced by GIC from the year 1979. This scheme was

based on "Area Approach". This scheme covered crops such as Cereals,

Millets, Oilseeds, Cotton, Potato and Gram. The scheme was confined to

loanee farmers only and on voluntary basis. The risk was shared between

General Insurance Corporation of India and State Governments in the ratio

of 2:1. The maximum sum that could be insured under the scheme was

100% of the crop loan, which was later increased to 150%.

Under this scheme, 50% of the subsidy was provided for insurance chargeswhich was payable to the small / marginal farmers by the State Government

& the Government of India on 50:50 basis.

Comprehensive Crop Insurance Scheme:

The Government of India had introduced the Comprehensive Crop

Insurance Scheme with effect from 1st April 1985. This scheme was

introduced with the active participation of State Governments. The Scheme

was optional for the State Governments.1. This Scheme was linked to the short-term crop credit that was extended to

the farmers and was implemented using the Homogeneous Area approach.

The numbers of states that were covered under the scheme were 15 States.

2. This Scheme was implemented until Kharif 1999. Some of the important

features of this scheme allowed a cover to the farmers availing crop loans

from Financial Institutions for growing food crops & oilseeds on

compulsory basis. The coverage under this scheme was restricted to 100% of

crop loan subject to a maximum of Rs. 10,000/- per farmer. The premiumrates for Cereals and Millets were 2% and for Pulses and Oil seeds 5%.

The premium and risk claims were shared in a ratio of 2:1 by the central and

state Government. The Scheme was optional to State Government.



CROP INSURANCE

36

Object: the objects of this scheme are:

(1) To provide economic assistance to farmers in case of loss to crops by

floods, draughts etc.

(2) To re-determine the eligibility criteria for loans for the next crop.Where the farmers suffered losses at the present season.

(3) To extend assistance to the farmers for the cultivation of food crops,

spices and oil seeds.



CROP INSURANCE

37

FEATURES OF T HE SCHEME

1. Insured Crops

Insurance cover is provided for the cultivation of rice, wheat, millet,

oil seeds and spices.

2. Security To Farmers

Crop insurance support is provided to all the farmers who obtain

credit from cooperative credit societies , commercial banks and

regional rural banks for the purpose of increasing agricultural

production.

3. Crop Insurance Made Essential For Obtaining CreditWhere the agricultural credit is available for increasing production, it

was made essential for the farmers to get their crops insured while

receiving credit from the above stated financial institutions.

4. Partnership In Sharing Risk

The risk involved in crop insurance is borne by the central and state

governments in the proportion of 2:1. But the expenses towards the

management of the scheme are equally distributed by the centralgovernment and General Insurance Corporation.

5. Creation of µInsurance Fund¶

The central government has created a fund called µInsurance Fund¶ for

the crop insurance plan. similarly, such a fund was created by every

state government.

6. Premium

y The premium rates are too minute. The present rates are as

follows:

y In the case of wheat, paddy and millet, sum equals to 2 per cent of

the sum insured.



CROP INSURANCE

38

y In the case of oil seeds and spices, sum equals to 1 per cent of the

sum insured.

7. Assistance Towards Premium

per cent of the premium is provided to small and marginal farmers bythe government towards economic assistance. This expenditure is met

out the by the central and state governments equally.

8. Minimum Production

Under the scheme, the minimum agricultural production shall be

equivalent to 80 per cent of the average production of proceding five

years.

9. Extension of The Scheme

This scheme, at present is operative in 15 states and 2 centrally ruledprovinces of the country.

10. Level ¶Crop Insurance Cell¶

In order for effective implementation and better coordination between

state governments and related institutions the General Insurance

Corporation has set up a state level µCrop Insurance Cell¶ at every

state capital.

11. The Functions of Central Insurance Fund y To collect the crop insurance premiums of the policies being

issued and from financial institutions.

y Settlement of claims immediately.

y Giving all technical guidance and supervision of the state funds.

y Collection and dissemination of statistical information

y To motivate the state government for needful marketing and

publicity matters.

y To establish coordination between crop insurance andagriculture development programmes.

12. Role Of State Governments

y The role of state governments in the crop insurance scheme is as

under:



CROP INSURANCE

39

y To delegate power to State Crop Insurance Fund to act as co-

insurer for all the crop insurance policies issued in the state.

y To extend 25 per cent assistance into all insured small and

marginal farmers against insurance premiums.

y To provide managerial assistance in respect of making available

information relating to agricultural production, and publication of

such information, etc.

13. Monitoring and Feed back

The crop insurance scheme monitored from time to time and

evaluated its progress every year. The Agricultural Ministry Prepares

its reports.



CROP INSURANCE

40

CROP INSURANCE SCHEME OLD AND NEW

parameter Old scheme (NAIS) Modified scheme

(MNAIS)

Insurance unit District Village panchayat

Early settlement Based on final yield

estimates submitted by

government of state

Up to 25% of likely total

claims

Pre-sowing/

planting risk

Not covered Prevented/ failed sowing

risk to be covered up to

25% of sum insuredIndemnity levels 60%, 80%, and 90% 70%, 80%, and 90%

Compulsory/

voluntary nature

Compulsory for farmers

who take loans and

voluntary for farmers

who don¶t take loans

No change

Localized

calamities

Not covered Individual claim

assessment in case of hail

storm, landslidePost -harvest losses Not covered Post-harvest losses due to

cyclones to be covered in

coastal areas

Weather factors Different for farmers

who take loan and those

who don¶t

Uniform for farmers who

take loans and those who

don¶t



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41

NATIONAL AGRICULTURAL INSURANCE SCHEME (CROP INSURANCE)

The National Agricultural Insurance Scheme (NAIS) was introduced by the

Government of India in the country from Rabi 1999 ± 2000. In our state thisscheme has been introduced from Kharif 2000 season onwards with

involvement of Agriculture Department, Agricultural Insurance Company

(Implementing Agency) and Directorate of Economics & Statistics.

This scheme is being implemented in the state with the active participation

and involvement of District Cooperative Central Banks, Rural Banks,

Commercial Banks and Primary Agricultural Cooperative Societies.

OBJECTIVES:-

1. To provide a measure of financial support to the farmers in the event

of crop failure as a result of drought, cyclone and incidence of pest &

diseases etc.

2. To restore the credit eligibility of a farmer after a crop failure for the

next season.

3. To encourage the farmers to adopt progressive farming practices,

high value in-puts and higher technology in Agriculture.

4. To help stabilize farm incomes, particularly in disaster years.



CROP INSURANCE

42

AREA APPROACHAND UNIT OF INSURANCE:

The scheme would operate on the basis of ³Area Approach´ i.e., Defined

Areas for each notified crop for widespread calamities and on an individual

basis for localized calamities such as hailstorm, landslide, cyclone and flood.The Defined Area (i.e., unit area of insurance) may be a Gram Panchayat,

Mandals, Group of Mandals or Districts etc. to be decided by the State

Government. However each participating State Government will be required

to reach the level of Gram Panchayat as the unit in a maximum period of

three years

Sum insured /limit of coverage:

The Sum Insured (SI) may extend to the value of the threshold yield of theinsured crop at the option of the insured farmers. However, a farmer may

also insure his crop beyond value of threshold yield level upto 150% of

average yield of notified area on payment of premium at commercial rates.

In case of Loanee farmers the Sum Insured would be atleast equal to

the amount of crop loan advanced. Further, in case of Loanee farmers, the

Insurance Charges shall be an additional to the Scale of Finance for the

purpose of obtaining loan. In matters of Crop Loan disbursement

procedures, guidelines of RBI/NABARD shall be binding.

Premium Rates:

Premium rates are 3.5% for bajra, and oilseeds and 2.5% for other Kharif

crops, 1.5% for wheat, and 2% for other rabi crops. In case the rates worked

out on the basis of actuarial data are less than the prescribed rate, the lower

rate will be applicable.

NATURE OF COVERAGE AND INDEMNITY:-

Under National Agricultural Insurance Scheme Compensation will becalculated for the notified crops in the notified areas on the basis of average

yield assessed on the basis of Crop Cutting Experiments on the following

formula.



CROP INSURANCE

43

Threshold yield - Actual yield

X Sum insured

Threshold yield (loan sanctioned amount)

Where:

Threshold yield = Guaranteed Yield

Actual Yield = Current yield of the notified crop.

Sum insured = Loan Sanctioned

Whenever yield loss occurs the compensation amount will be

calculated by the Agricultural Insurance Company of India Limited, and the

same will be credited to the eligible loanee¶s accounts by the concerned

banks. In a particular insurance unit, if the Actual Yield is higher than the

threshold yield (Guaranteed) the compensation will be Nil.

How to apply for the crop insurance

At the beginning of each crop season, the State Govt. /UTAdministration in consultation with GIC notifies the crops and defines the

areas which will be covered under the scheme during the season. The

monthly crop-wise and area-wise details of crop insurance with premium are

remitted to the nodal points and nodal point on receipt of such inputs from

various loan disbursing points, scrutinizes and transmits them GIC on

monthly basis as per cut-off dates fixed. The loanee farmer has to take crop

insurance with the loan for which the bank will make him fill the declaration

form as shown below and the relevant documents have to be attached to theproposal form. The non-loanee farmer who desires to join the scheme would

fill up proposal and the declaration form of NAIS and submits the same

along with premium in the village branch of commercial bank or Regional

Rural Bank or PACS of Cooperative Bank. It is the responsibility of the

branch/PACS to verify the particulars of sum insured the maximum limit



CROP INSURANCE

44

etc., while accepting the proposal. The particulars then are consolidated and

sent to the respective nodal points for onward transmission to GIC State

Level Crop Insurance Cell before the dates specified in the notification of

the Government.

Forms in attachment

1. Proposal Form for Non-Loanee Farmer

2. Declaration Form for Loanee Farmer

3. Declaration Form for Non-Loanee Farmer

Calculation of Agriculture Insurance Amount/Premium:

The amount of premium depends on a number of factors like size of

land of the farmer, his financial standing, number of crops being insured and

the sum insured. Farmers can claim from the banks by submitting a claim

form. The claim representative will analyse the extent of damage caused to

the crops. Based on the report of the surveyor, the claim is given to farmers

within a month.

Documents Required for Agriculture Insurance Claim:

1. The farmer must approach the designated branch / PACS and submit

the proposal form in the prescribed format.2. The farmer must provide documentary evidence in regard to the

possession of cultivable land (copy of the pass book and extract.

3. Land revenue receipt should be enclosed

The farmer must furnish area sown confirmation certificate, if require



CROP INSURANCE

45

Procedure for approval & settlement of claims:

1. Once the yield data is received from the State/UT Govt. as per the

prescribed cut-off dates, claims will be worked out and settled by IA.

2. The claim cheques along with claim particulars will be released to theindividual Nodal Banks. The Bank at the grass root level, in turn, shall credit

the accounts of the individual farmers and display the particulars of

beneficiaries on their notice board.

3. In the context of localised phenomenon, viz., hailstorm, landslide, cyclone

and flood, the IA shall evolve a procedure to estimate such losses at

individual farmer level in consultation with DAC/State/UT. Settlement of

such claims will be on individual basis between IA and insured.



CROP INSURANCE

46

WEAT HER INSURANCE SCHEMES

Insurance for losses due to vagaries of weather - excess of rainfall, shortfall

in rainfall, lack of sunshine etc

Weather insurance schemes launched: Varsha Bima ± 2005

Scope:

Varsha Bima covers anticipated shortfall in crop yield on account of deficit

rainfall. Varsha Bima is voluntary for all classes of cultivators who stand to

lose financially upon adverse incidence of rainfall can take insurance under

the scheme. Initially Varsha Bima is meant for cultivators for whom

National Agricultural Insurance Scheme (NAIS) is voluntary.

Period of Insurance:

The insurance operates during June to September for short duration

crops; June to October for medium duration crops; and June to November

for longer duration crops. Further, these periods are state-specific. In case of

Sowing Failure option its from 15th June to 15th August.

How to Buy Varsha Bima:

Proposal forms are available at all the loan disbursing outlets viz

PACs branches of all Cooperative/ Commercial/ Rural banks.The coverage

under Varsh Bima at the grass-root level shall be made mostly through the

existing network of Rural Finance Institutions (RFIs) as in NAIS,

particularly Cooperative Sector Institutions. AIC shall also directly market /

provide insurance subject to the availability of its network. The network of

formal and informal institutions working in the rural areas, such as NGOs,

Self Help Groups (SHGs), Farmers Groups could also be utilized for

delivery of Varsha Bima. The cultivators proposed for insurance under

Varsha Bima is required to have a Bank Account at the RFI Branch, which

will facilitate his / her insurance transactions.

Insurance Buying Period:

A cultivator can buy Varsha Bima only upto 15th June for sowing

failure option and 30th June for other options



CROP INSURANCE

47

COVERAGE OPTIONS

Options - I: Seasonal Rainfall Insurance

Coverage is against negative deviation of 20% and beyond in Actual Rainfall (in

mm) from Normal Rainfall (in mm) for the entire season. Actual Rainfall is the

monthly cumulative rainfall from June to November (with June to September or

October for short & medium duration crops). The pay-out structure is designed in

such a way that the yield is correlated to various ranges of adverse deviation in

rainfall. The sum insured per hectare is the maximum pay-out corresponding to the

maximum potential loss. The claim pay-out shall be on a graded scale (in slabs),

corresponding to different degrees of adverse deviation in Actual Rainfall.

Options - II: Rainfall Distribution Index

Coverage is against adverse deviation of 20% and beyond in Actual Rainfall Index

from Normal Rainfall Index for the entire season. The index is constructed to

maximize the correlation, for weekly rainfall within the season. The indices vary

from IMD station to station and crop to crop. The sum insured per hectare is the

maximum pay-out corresponding to the maximum potential loss. The claim pay-

out shall be on a graded scale (in slabs), corresponding to different degrees of

adverse deviation in Actual Rainfall Index.

Options - III: Sowing Failure

Coverage is against adverse deviation in Actual Rainfall (in mm) from Normal

Rainfall (in mm) beyond 40% between 15th June and 15th August. The sum

insured per hectare is the maximum input cost incurred by the cultivator till the end

of the sowing period, and is pre-specified. The claim pay-out shall be on a graded

scale, corresponding to different degrees of rainfall deviation. The maximum pay-

out of 100% of sum insured is available at deviations of 80% & above.

Sum Insured:

Sum Insured is pre-specified and normally is between cost of production and value

of production. Incase of Sowing Failure option, it is the maximum input cost

incurred by the cultivator till the end of the sowing period, which again is pre-

specified.



CROP INSURANCE

48

Premium:

Premium may vary from option to option and crop to crop. The premium rates

have been optimized vis-a-vis benefits, and starts from 1%.

Time Schedule and Procedure of Claim Payment:The procedure for working out Claims is automated i.e., there shall be no

necessity for submission of loss information or Claims intimation by insured

cultivator. Normally Claims are paid on the basis of Actual Rainfall data within a

month from end of Indemnity period.



CROP INSURANCE

49

CROP INSURANCE CYCLE

1. Sales Closing Date / Application

The Crop Insurance Cycle begins each year with the insurance offer.

Actuarial documents are published annually by the Risk Management

Agency (RMA). The actuarial documents list the plan of insurance, crop,

type, variety, and practice that may be insured in a state and county, and

show the amounts of insurance, available insurance options, levels o

coverage, price elections, applicable premium rates, and subsidy amounts.

The Special Provisions of Insurance list program calendar dates, and general

and special statements which may further define, limit, or modify coverage.Insurance applications must be completed and signed no later than the sales

closing date specified in the crop actuarial documents. Applications signed

after the crop sales closing date may be rejected by the insurance provider.



CROP INSURANCE

50

2. Acceptance

Upon receipt of a properly completed and timely submitted insurance

application, the insurance provider will accept and process the application,

unless the applicant is determined to be ineligible under the contract or Federal statute or regulation. The insurance provider will issue a summary o

coverage and the appropriate policy documents to the applicant. After the

application is accepted, the policyholder may not cancel the policy for the

initial crop year.

3. Production Reporting

The Production Reporting Date (PRD) is latest date production reports will

be accepted for inclusion in the database used to calculate approved APH

yields for the current crop year. It is the earlier of the acreage reporting date

or 45 calendar days after the earliest cancellation date for the crop for the

current crop year, unless otherwise stated in the Special Provisions.A

production report is a written record showing the insured's annual production

used to determine the insured's yields for insurance purposes, and it contains

yield information for previous years, including planted acreage and harvested

production. Production reports must be supported by written verifiable

records from a warehouseman or buyer of the insured crop, or by

measurement of farm-stored production, or by other records of production

approved by the AIP on an individual case basis.If a crop has both a spring

and fall sales closing date (SCD), and application for insurance is made after

the earlier SCD or land is added after the PRD on which the spring type will

be planted, the initial PRD is the earlier of the acreage reporting date or 45

calendar days after the spring SCD. Insurance does not attach to the acreage

planted to the type with the earlier SCD if application is made after the

earlier SCD.

4. Insurance Attaches

For annual crops, insurance attaches annually when planting begins on the

insurance unit. The crop must be planted on or before the crop's published

final planting date unless late or prevented planting provisions apply. I

prevented planting provisions apply, and the crop cannot be timely planted



CROP INSURANCE

51

due to the causes specified in the crop provisions, such acreage may be

eligible for a prevented planting payment.For perennial crops, insurance

attaches each crop year on the calendar date specified in the crop provisions.

5.

Acreage Reports

The policyholder must annually report for each insured crop in the county the

number of insurable and uninsurable acres planted or prevented from being

planted if prevented planting is available for the crop, the date the acreage

was planted, share in the crop, the acreage location, farming practices used,

and types or varieties planted to the insurance provider on or before the

applicable acreage reporting date specified in the crop actuarial documents.

This report is used by the insurance provider to establish the amount o

coverage and premium for the crop. Insurance providers may deny coverageif the acreage report is filed after the applicable crop acreage reporting date.

6. Summary of Coverage

The insurance provider will process a properly completed and timely filed

acreage report, and issue to the policyholder a summary of coverage that

specifies the insured crop, the insured acres and amount of insurance or

guarantee for each insurance unit. The policyholder may make changes to the

filed acreage report, if permitted by the insurance provider.

7. Premium Billing

The annual premium is earned and payable at the time insurance coverage

begins. The insurance provider shall issue a premium billing based upon the

information contained in the acreage report no earlier than the premium

billing date specified in the crop actuarial documents. The premium billing

will specify the amount of premium and any administrative fees that may be

due. If the premium or administrative fees are not paid by the date specified

in the actuarial documents or policy, the insurance provider may assess

interest on the outstanding premium balance.



CROP INSURANCE

52

8. Cancellation/Termination

Insurance coverage is continuous and can be cancelled by either the

insurance provider or the policyholder for the following crop year by

providing a written notice to the other party no later than the cancellationdate specified in the crop policy. For a policyholder insured the previous

crop year, any changes he or she wishes to make to the policy coverage must

be made on or before the crop sales closing date. The policy will

automatically renew for the subsequent crop year unless the policyholder

cancels the policy in writing on or before the crop cancellation date.

Insurance coverage may be terminated by the insurance provider for the

following crop year for nonpayment of outstanding debt by providing a

written notice to the policyholder no later than the termination date specified

in the crop policy. The insurance provider may terminate coverage on a crop

if no premium is earned for three consecutive years.



CROP INSURANCE

53

NATIONAL CROP INSURANCE SCHEME (INDIA)

Objectives:

The objectives of the scheme are as under: -

1. To provide insurance coverage and financial support to the farmers in the

event of natural calamities, pests & diseases.

2. To encourage the farmers to adopt progressive farming practices high value

in-puts and higher technology in Agriculture.

3. To help stabilize farm incomes, particularly in disaster years.

Salient features of the scheme: -

1. Crops covered:-

The crops in the following broad groups in respect of which i) the past yield

data based on Crop Cutting Experiments (CCEs) is available for adequate

number of years, and ii) requisite number of CCEs are conducted for

estimating the yield during the proposed season:

a. Food crops (Cereals, Millets & Pulses)

b. Oilseeds

c. Sugarcane, Cotton & Potato (Annual Commercial/annual Horticultural

crops)

Other annual Commercial/annual Horticultural crops subject to availability

of past Yield data will be covered in a period of three years. However, the

crops which will be covered next year will have to be spelt before the close

of preceding year.



CROP INSURANCE

54

2. States and areas to be covered:

The Scheme extends to all States and Union Territories. The States/Uts

opting for the Scheme would be required to take up all the crops identified

for coverage in a given year.

Exit clause: The States/Union Territories once opting for the Scheme, will

have to continue for a minimum period of three years.

3. Farmers to be covered:

All farmers including sharecroppers, tenant farmers growing the

notified crops in the notified areas are eligible for coverage.The Scheme covers

following groups of farmers:

y On a compulsory basis: All farmers growing notified crops and availing

Seasonal Agricultural Operations (SAO) loans from Financial Institutions

i.e. Loanee Farmers.

y On a voluntary basis: All other farmers growing notified crops (i.e., Non-

Loanee farmers) who opt for the Scheme.

4. Risks covered & exclusions:

Comprehensive risk insurance will be provided to cover yield losses due to

non-preventable risks, viz.:

i) Natural Fire and Lightning

ii) Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Torando etc.

iii) Flood, Inundation and Landslide

iv) Drought, Dry spells

v) Pests/Diseases etc.

Losses arising out of war & nucler risks, malicious damage & other

preventable risks shall be excluded.



CROP INSURANCE

55

5. Sum insured /limit of coverage:

The Sum Insured (SI) may extend to the value of the threshold yield of the

insured crop at the option of the insured farmers. However, a farmer may also

insure his crop beyond value of threshold yield level upto 150% of average yield of notified area on payment of premium at commercial rates.In case of Loanee

farmers the Sum Insured would be atleast equal to the amount of crop loan

advanced. Further, in case of Loanee farmers, the Insurance Charges shall be an

additionality to the Scale of Finance for the purpose of obtaining loan.In matters of

Crop Loan disbursement procedures, guidelines of RBI/NABARD shall be

binding.

Transition to the actuarial regime in case of cereals, millets, pulses & oilseeds

would be made in a period of five years. The actuarial rates shall be applied at

District/Region/State level at the option of the State Govt./UT.

7. Premium subsidy:

50% subsidy in premium is allowed in respect of Small & Marginal farmers

to be shared equally by the Govt. of India and State/UT Govt. The premium

subsidy will be phased out on sunset basis in a period of three to five years subject

to review of financial results and the response of farmers at the end of the first year of the implementation of the Scheme.

The definition of Small and Marginal farmer would be as follows:

Small Farmer: A Cultivator with a land holding of 2 hectares (5 acres) or less, as

defined in the land ceiling legislation of the concerned State/UT.

Marginal Farmer: A Cultivator with a land holding of 1 hectare or less (2.5 acres).

8. Sharing of risk:

Risk will be shared by IA and the Govt. in the following proportion.Food

crops & Oilseeds: Till, complete transition to Actuarial regime in a period of five

years takes place, claims beyond 100% of premium will be bone by the Govt.

Therefore, all normal claims, i.e. claims upto 150% of premium will be met by IA



CROP INSURANCE

56

and claims beyond 150% shall be paid out of Corpus Fund for a period of three

years. After this period of three years claims upto 200% will be met by IA and

above this ceiling out of the Corpus Fund.

Annual Commercial crops/annual Horticultural crops: Implementing Agencyshall bear all normal losses, i.e claims upto150% of premium in the first three

years and 200% of premium thereafter subject to satisfactory claims experience.

The claims beyond 150% of premium in the fist three years and 200% of premium

thereafter shall be paid out of Corpus Fund. However, the period of three years

stipulated for this purpose will be reviewed on the basis of financial results after

the fist year of implementation and the period will be extended to five years if

considered necessary.

To meet Catastrophic losses, a Corpus Fund shall be created will

contributions from the Govt. of India and State Govt./UT in 50:50 basis. A portion

of Calamity Relief Fund (CRF) will be used for contribution to the Corpus Fund.

9. Area approach and unit of insurance:

The Scheme would operate on the basis of µArea Approach¶ i.e., Defined

Areas for each notified crop for widespread calamities and on an individual basis

for localised calamities such as hailstorm, landslide, cyclone and flood. TheDefined Area (i.e., unit area of insurance) may be a Gram Panchayat, Mandal,

Hobli, Circle, Phirka, Block, Taluka etc. to be decided by the State/UT Govt.

However, each participating State/UT Govt. will be required to reach the level of

Gram Panchayat as the unit in a maximum period of three years.

Individual based assessment in case of localised calamities, would be

implemented in limited areas on experimental basis, initally and shall be extended

in the light of operational experience gained. The District Revenue administration

will assist Implementing Agency in assessing the extent of loss.

10.Estimation of crop yield:

The State /UT Govt. will plan and conduct the requisite number of Crop

Cutting Experiments (CCEs) for all notified crops in the notified insurance units in



CROP INSURANCE

57

order to assess the crop yield. The state/UT Govt. will maintain single series of

Crop Cutting Experiments (CCEs) and resultant yield estimates, both for Crop

Production estimates and Crop Insurance.Crop Cutting Experiments (CCE) shall

be undertaken per unit area/per crop. On a sliding scale, as indicated below:

S

N.

Unit Area Minimum number of

C.C.E.s required to be

done

1. Taluka/Tehsil/Block 16

2. Mandal/Phirka/any other smaller unit area comprising

8-10 villages

10

3. Gram Panchayat comprising 4-5 villages 08

A Technical Advisory Committee (T.A.C.) comprising representatives from

N.S.S.O., Ministry of Agriculture (G.O.I.) and IA shall be constituted to decide the

sample size of CCEs and all other technical matters.

11. Levels of Indemnity & Threshold Yield:

Three levels of Indemnity, viz., 90%, 80% & 60% is corresponding to Low

Risk. Medium Risk & High Risk areas shall be available for all crops (cereals,

millets, pulses & oilseeds and annual commercial/ annual horticultural crops)based on Coefficient of Variation (C.V.) in yield of past 10 years¶ data. However,

the insured farmers of unit area may opt for higher level of indemnity on payment

of additional premium based on actuarial rates.

The Threshold yield (TY) or Guaranteed yield for a crop in an Insurance

Unit shall be the moving average based on past three years average yield in case of

Rice & Wheat and five years average yield in case of Other crops, multiplied by

the level of indemnity.

12. Nature of Coverage and Indemnity:

If the µActual Yield¶ (AY) per hectare of the insured crop for the defined

area [on the basis of requisite number of Crop Cutting Experiments (CCEs)] in the

insured season, falls short of the specified µThreshold Yield¶ (TY), all the insured



CROP INSURANCE

58

farmers growing that crop in the defined area are deemed to have suffered shortfall

in their yield. The Scheme seeks to provide coverage against sucbcontigency.

13. Indemnity in case of localised risks:

Loss assessment and modified indemnity procedures in case of occurrence

of localised perils, such as hailstorm, landslide, cyclone and flood where settlement

of claims will be on individual basis, shall be formulated by IA in coordination

with State/UT Govt. The loss assessment of localised risks on individual basis will

be experimented in limited areas, initially and shall be extended in the light of

operational experience gained. The District Revenue administration will assist IA

in assessing the extent of loss.

14. Financial support towards administration & operating (A & O) expenses:

The A & O expenses would be shared equally by the Central Govt. &

respective State Government on sunset basis [100% in 1st

year, 80% in 2nd

year,

60% in 3rd

year, 40% in 4th

year, 20% in 5th

year and µzero¶ thereafter.]

15. Corpus fund:

To meet Catastrophic losses, a Corpus Fund shall be created with

contributions from the Govt. of India and State/UT. On 50:50 basis. A portion of

Calamity Relief Fund (CRF) shall be used for contribution to the Corpus Fund.The

Corpus Fund shall be managed by Implementing Agency (IA).

16. Reinsurance cover:

Efforts will be made by IA to obtain appropriate reinsurance cover for the

proposed RKBY in the international Reinsurance market.

17. Management of the scheme, monitoring and review:

In respect of Loanee farmers, the Bank shall collect the premium along with

the Declarations and send it to IA within the prescribed time limits. However, in



CROP INSURANCE

59

areas where IA has requisite infrastructure, a non-loanee farmer will have option to

send premium along with Declaration, directly to IA within the time limits.

Selection of the Banks will be on the basis of Service Area Approach (SAA)

of RBI or at the option of the Banks (Where co-operative banks have goodnetwork). The Department of Agriculture, Agricultural Statistics, Directorate of

Economics and Statistics, Department of Co-operation, Revenue Department of the

State Government will be actively involved in smooth implementation of the

Scheme.

The Scheme will be implemented in accordance with the operational

modalities as worked out by IA in consultation with Dept. of Agriculture & Co-

operation.

During each crop season, the agricultural situation will be closely monitored

in the implementing State/UT. The State / UT Department of Agriculture and

district administration shall set up a District Level Monitoring Committee

(DLMC), who will provide fortnightly reports of Agricultural situation with details

of area sown, seasonal weather conditions, pest incidence, stage of crop failure {if

any} etc.

The operation of the Scheme will be reviewed annually, and modificationsas may be required would be introduced. Periodic Appraisal Reports on the

Scheme would be prepared by Ministry of Agriculture, the Government of

India/Implementing Agency.

18. Implementing Agency (IA):

An exclusive Organization would be set up in due course, for implementation of

RKBY. Until such time as the new set up is created, the µGIC of India¶ will

continue to function as the Implementing Agency.



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60

19. Benefits expected from scheme:

The scheme is expected to:

1. Be a critical instrument of development in the field of crop production,

providing financial support to the farmers in the event of crop failure.

2. Encourage farmers to adopt progressive farming practices and higher technology

in Agriculture.

3. Help in maintaining flow of agricultural credit.

4. Provide significant benefits not merely to the insured farmers, but to the entire

community directly and indirectly through spillover and multiplier entirecommunity directly and indirectly through spillover and multiplier effects in terms

of maintaining production & employment, generation or market fees, taxes etc.

And net accretion to economic growth.



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61

NATURAL DISASTERS AND CROP PROTECTION

Since Independence, India has borne the brunt of a large number of natural

disasters like earthquakes, floods, drought and pest attacks. The main reason why

India is susceptible to such disasters is because of its geographical location,

weather and other physical features. The rising population of the country has

driven farmers to settle in risky areas like flood plains, drought-prone areas,cyclone-prone areas and seismic zones. Natural disasters leading to a failure of

crops play havoc with the economy of a country. Prices would rise to an extremely

high level and the poor would starve.

The best way to deal with such disasters is to be prepared for any

eventuality. Keeping this in mind the government has developed contingency plans

for farmers to tackle natural disasters before they strike. The government also

provides compensation and other financial aid to farmers who are affected by

natural disasters. This is done to encourage them to continue to invest in andproduce agricultural commodities.



CROP INSURANCE

62

Flood

The monsoons play a critical role in determining whether the harvest will be

bountiful, average or poor in any given year. Excess rainfall leads to the

overflowing of rivers, streams and lakes. This extra water fills low-lying fields andcreates a flood situation. Floods destroy not only lives and property but also the

entire crop production work carried out in the summer. Certain crops cannot bear

excess water and they die leaving the farmer with a burden of debt. The National

Commission on Floods has assessed the flood prone area in India to be around 12

per cent of the total area.

When floods take place, both the Central and State Governments announce

various plans to minimize the damage. Farmers are covered under schemes of the

government. Activities of the government include provision of shelter, food

supplies, clearing of debris and vocational training. The Prime Minister announces

compensation from the Prime Minister's National Relief Fund to the next of kin of

those killed in natural disasters whenever they occur

Drought

Drought is said to have occurred when the principal monsoon fails or is

deficient. It leads to crop failure due to insufficient irrigation, shortage of drinkingwater as well as undue hardship to the rural and urban community. There is no

provision for declaration of drought by Government of India. Drought is declared

for each State or part of the State by the State Governments. The important steps

followed in India to control and manage drought are as follows:

y Monitoring and early warning: The Indian Meteorology Department

carries out the function of drought monitoring and forecasting. The

agricultural department comes out with contingency plans to help farmers

save their crops in case a drought like situation emerges. Here is the latestweather situation and crop advisory prepared by the Indian Council of

Agricultural Research.

y Drought Declaration: States monitor rainfall at mandal or tehsil levels and

gather information from remote sensing agencies. If the information proves

that drought has occurred then the State Government may declare a situation



CROP INSURANCE

63

of drought. The Central Government then aides the financial and

institutional processes to provide relief to the affected.

y Monitoring and management of drought impacts: The Central

Government provides financial assistance in accordance with relief norms

laid by the Finance Commission. Assistance to the States is given in theform of Calamity Relief Fund, which is released to the States in two

installments, one in May and the other in October.

Plant Protection

One of the most significant pest management schemes run by the

government is the Integrated Pest Management Scheme (IPM) - External website

that opens in a new window. This scheme aims at the best mix of all known pest

control measures to keep the pest population below the economic threshold level or

ETL. The scheme is 100 per cent centrally sponsored. The Central Government

also runs a scheme to monitor and control the locust population.

The government has set up the National Plant Protection Training Institute

in Hyderabad to impart training in plant protection methods. This institute

specializes in human resource development in plant protection technology by

organizing long and short duration training courses on different aspects of plant

protection. It also imparts training to foreign nationals sponsored through bilateralprogrammes with various agencies.

More information on plant protection is available through pest management

and plant protection schemes of the Government.

Crop Insurance

Crop production depends on the vagaries of weather and prevention of

attacks from pests. As the weather is extremely hard to predict even for topprofessionals and pests can attack anytime, it helps to have some crop insurance.

This insurance protects you from most eventualities like floods, droughts, crop

diseases and attacks by pests.



CROP INSURANCE

64

An All-Risk Comprehensive Crop Insurance Scheme (CCIS) for major crops

was introduced in 1985, coinciding with the introduction of the Seventh-Five-Year

Plan. The National Agricultural Insurance Scheme or NAIS subsequently replaced

it in 1999-2000. The NAIS was originally managed by the General Insurance

Company. Later on, a new body called the Agriculture Insurance Company of India was formed to implement this scheme.

The National Agricultural Insurance Scheme is also known as the Rashtriya

Krishi Bima. It is a comprehensive scheme that provides insurance coverage and

financial support to farmers in the event of failure of any of the notified crops as a

result of natural calamities, pests and diseases. The scheme also encourages

farmers to adopt progressive farming practices, high value inputs and modern

technology. NAIS extends to all States and Union Territories.

Other than the NAIS Scheme, the Agriculture Insurance Company of India

is also involved in creating and executing other insurance schemes related to

agriculture and allied subjects. Some such schemes are the, Sukha Suraksha

Kavach and Coffee Insurance .



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65

CASE STUDY

ICICI LOMBARD TO PROVIDE WEAT HER COVERED IN 10 STATE

ICICI Lombard General Insurance Company has been given the mandate toprovide weather-based crop insurance for rabi season (2010-11) in MadhyaPradesh, Bihar,Tamil Nadu, Karnataka, West Bengal, Chhattisgarh, Jharkhand andHimachal Pradesh.

The insurance company will cover 69 districts ² 30 loanee districts

(farmers who have taken loans) and 39 non-loanee districts. The major crops thatICICI Lombard covers for the season are winter paddy, cotton, wheat, mustard,barley, maize, onion, potato, tomato, lentil, peas, arhar, jowar, fenugreek,coriander, cumin, methi, isabgol, brinjal among other crops.

Weather-based crop insurance provides cover against weather-related riskssuch as excess or deficit rainfall, variations in temperature and fluctuations inhumidity. Thisscheme facilitates immediate compensation based on certified datacollected from independent third party bodies such as Indian MeteorologicalDepartment (IMD) and National Collateral Management Services Ltd. (NCMSL).This transparent and objective method of claim settlement removes the need for carrying out field surveys. This makes the claim settlement a hassle-free process,as the beneficiary is not required to file a claim for loss to receive a payout.

ICICI Lombard in 2009-10 insured over 29 lakh farmers and over 19 lakhacres across 14 states.

Alok Agarwal, director (corporate), ICICI Lombard General Insurance,said, "Agriculture is a significant contributor to the Indian economy, accounting for 24% of the Indian GDP. The rural economy faces economic strain due to variationin agriculture production.Weather insurance protects the farmer against financialloss arising out of adverse weather conditions. We consider it to be our privilege tohave been chosen to provide weather-based crop insurance for farmers in 10

states."



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66

INDEPT H STUDY OF FARMERS SUICIDES, T HEIR CAUSES AND REMEDIES

One of the most disquieting development in the era of the neo-liberal policy

in India has been widespread occurrence of farmers¶ suicides in different parts of

the country including not only the drought prone areas of Andhra Pradesh,Karnataka and Maharashtra but also a State of heavy rainfall like Kerala, as also aState like Punjab with large areas under irrigation.With the preoccupation of theGovernment with the rate of economic growth and promotion of the private sector in the secondary and tertiary sectors, that is, industrial and service sectors, theagricultural sector and the sector of rural development were neglected. Thegovernment did not wake up for many years to attend to this phenomenon. The

Finance Minister was disturbed by the fall in the stock exchange and elated whenthe stock exchange rose. The Reserve Bank, forgetting its responsibility for theagricultural and rural sector, started concentrating on what it considered to be its

legitimate concern, namely, monetary policy and sound banking, mainly measuredin terms of profit and loss. It is estimated that more than one-and-a-half lakhfarmers committed suicide. This is indeed a black mark on the economicperformance of the government.

Even though the phenomenon of farmers¶ suicides started assuming serious

proportions, the then Chief Minister of Karnataka, S.M. Krishna, and the thenChief Minister of Andhra Pradesh, Chandrababu Naidu, looked upon themselves asthe CEOs of their States and found a sense of achievement in making Bangalore

the Silicon Valley of India and Hyderabad, a cyber city.W

hile they thought thatthis was the touchstone of their achievement, the rural voters suffering fromdrought rejected them and both lost power. In Maharashtra, the governmentneglected the phenomenon which was most striking in the Vidarbha area, until theHigh Court got seized of it and asked the Tata Institute of Social Sciences to studythe subject. The Government of Maharashtra then woke up and asked the IndiraGandhi Institute of Development and Research to make a survey and submit itsfindings. The Planning Commission also sent a team at the instance of the PrimeMinister to study the causes of farmers¶ suicides and propose suitable measuresand programmes. The State Government under pressure made some provisions and

after the Prime Minister¶s visit, the Central Government provided a financialpackage. Both these failed to stem the tide of farmers¶ suicides, suggesting that thepackage was not based on a correct understanding of the causes of farmers¶suicides. As the general elections are drawing near, the Finance Minister, in hisBudget speech, made a dramatic announcement of the write-off of loans of smalland marginal farmers and made a provision of Rs 60,000 crores, later increased toRs 71,000 crores, to enable the banks to write off the loans. This still leaves out the





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CONCLUSION

This fundamental principle of insurance is critical to an understanding of thehistory of crop insurance. Agricultural production is subject to many uncertainties,

including natural disasters. Adverse weather, insect infestations and plant diseases

can severely reduce the yield or quality of a crop, wiping out a farmer's profits for

the whole year in a bad season.

The most important consideration, as far as insurers are concerned, is the

potential for catastrophic losses resulting in widespread and severe damage claims.

Many "perils," or causes of loss, to which farmers are exposed, such as heat and

drought, freezing temperatures and excessive moisture, can affect whole regions.

Droughts may also persist for extended periods so that farmers may suffer

successive losses. But there is one common weather-related disaster that generally

impacts a more limited area, and that is hail.



CROP INSURANCE

BIBLIOGRAPHY

1. India insurance report series-I

Author-H Chaturvedi, Dharmendra Kumar,

Rahul Singh

2. Principles &Practice of Insurance

Author- Dr. P.Periasamy

3. Insurance Principles & Practice

Author- M.N.Mishra.

WEBLIOGRAPHY

http://prajnacapital.blogspot.com

http://www.ehow.com

http://www.nass.usda.gov

http://www.yourinfogallery.com