Impact of Weather Based Crop Insurance Scheme
Balasubramanian S, Chief Executive, People Mutuals, Tamil Nadu, India.
Farming is fraught with various risks and to protect the farmers from different risks of crop husbandry, Government of India is implementing three major agriculture insurance schemes. They are National Agricultural Insurance Scheme, Modified National Agricultural Insurance Scheme and Weather Based Crop Insurance Scheme (WBCIS). Of these, on WBCIS a study was undertaken to understand the stakeholders’ perspectives in Perambalur District of
Tamil Nadu state.
Perambalur Distirct is centrally located in TamilNadu and is 267 K.M away, in southern direction, from Chennai. In this district out of the total geographical extent of 3,69,107 hectares, only 2,38,814 hectares are used for agricultural purposes. Of these, the area under irrigation is 35488 hectares. There is no canal irrigation in the district. About 27138 hectares are under well irrigation and 8350 hectares are under tank irrigation. The remaining cultivated lands are under rain fed conditions and it constitutes about 90 percent of the agricultural lands of the district. The average rainfall of the district is 908 mm and the average rainfall received during north east monsoon is 475 mm and during south west monsoon is 314 mm. Due to the fact that rain fed being the predominant farming condition in the district, WBCIS is more appropriate for covering the rainfall risks in cropping.
In this connection, four Automatic Weather Stations have been established at Kalarampatti, Padalur, Kunnam and Veppanthattai. They are situated at:
- Panchayat office, Kalarampatti
- Sridevimangalam road, Padalur
- Taluk office, Kunnam
- Cotton Research station, Veppanthattai
They record the rainfall, wind velocity, wind direction, maximum and minimum temperature, sunshine hours etc. The weather data is the basis for the WBCIS, which is in implementation in the district. This also helps the farmers to know the rainfall level and decide on cropping based on the medium range forecasts.
Sampling of the study
The sample comprised of
- Scheme coverage wise – WBCIS insured (loanee and non loanee) and Non insured
- Land holding size wise – Marginal farmers, small farmers and large farmers
- Social Category wise – Scheduled Caste, Scheduled Tribe, Other Backward Class, General
- Gender wise – Male & Female
- Education qualification wise – School, graduate and post graduate
The responses of the farmers on WBCIS are not varying under different strata of sample farmers. The most critical constraints to the adoption of the WBCIS by the farmers are:
- Lack of knowledge about how insurance works
- Do not feel that crop insurance is useful for them
- Lack of information about the scheme
- Bad experience with crop insurance in the past
- Lack of trust on intermediary / insurance company
- Unaffordability to pay the premium by non loanee farmers
Almost all the covered farmers are only loanee farmers and the non loanee farmers are mostly not interested in taking up the scheme due to lack of awareness / knowledge on the scheme / product. Further their past experience of delayed claim settlement and non-transparent & complex claim processes work against the enrollment by non loanee farmers.
It is a common phenomenon that many farmers are reluctant to avail crop loans due to the mandate of crop insurance as they feel that they are only going to pay the premium for crop insurance without any claim even when there are crop losses.
- Their suggestion to the government and insurance companies for improving the WBCIS in this regard are:
- Full information should be given to farmers about the WBCIS scheme and the product
- Premium amount should be reduced
- Types of risks covered are not sufficient and needto be broadened
- Timely claim payments without delay
- Claim benefits should be adequate to meet the crop losses suffered by farmers
Other Stakeholders responses
The responses of the other stakeholders – Government officials, bank officials and insurers brought out the
Broadly WBCIS is considered to be appropriate for dry farming tracts like Perambalur district and further it is viable since it is recognized to be an actuarially priced product with scalable features. However at the field in Perambalur district, the product features are not at all known to any – District administration, agriculture department and bankers apart from the insured farmers. In the absence of knowledge of product features / terms – covered risks (rainfall deficiency, dry spell, excess rainfall etc) risk period, triggers and trigger benefits / payout amounts, the scheme has been implemented as a targeted activity. It is pertinent to note that even though the year 2012 was a drought year in the district, no claim payouts were received by the insured farmers, and this is blamed by all and however nobody is aware of the reasons of non triggering, due to lack of knowledge on product terms.
Further the enrollments were permitted up to August 2012, where as the sowing was able to be taken up only during September – October 2012. This is a clear indication of temporal basis risk as the product features would not be in tune with the crop stages. i.e. the critical period of water requirement for crop as per product would not match with the actual critical crop conditions in the field. This might be the cause for the insurance coverage of about 3,000 hectares only out of the agricultural lands of over two lakhs hectares.
It is ironical that the insured farmers, bank branches (master policy holders) as well as the implementing government machinery, are all put under dark of the insurance product features. If at all the free look period criterion of IRDA is applied to this scheme, insured farmers would be eligible for refund of the entire premium paid, as the insured / bankers were not at all issued with policy document and hence not able to look into it within 15 days.
Further the stakeholders are not able to access the rainfall data of the reference weather stations resulting in non transparency. The officials expressed that the premium is not affordable to the farmers.
In this regard, specific responses of bankers are:
- The coverage of eligible loanee farmers under WBCIS is mandatory. However some felt that mostly farmers with irrigation facilities avail crop loans and hence WBCIS may not be appropriate to them and hence could be made voluntary for loanee farmers also.
- The education on WBCIS product is necessary and at present it is lacking completely and the systems are not transparent resulting in the apprehensions in their minds on the unreliability of crop loss computation and claim settlements resulting in lack of satisfaction of farmers on the scheme.
- Bankers are not finding any impact of WBCIS crop insurance on loan recovery position
- Due to the inherent characteristics, the bank branches are not in position to take steps / efforts
on creating an understanding of crop insurance among the farmers
- To facilitate enrollment of farmers under crop insurance, the insurance premium could be met out of the interest subvention amount of the crop loans
- The enrollment system is complex and they face significant challenges in this regard.
Overall, the WBCIS was not appropriately positioned with the different stakeholders – Farmers, bankers and government departments in the district. There is an urgent need for insurance literacy programs to farming community on the concept of WBCIS and the product features, well ahead of the crop season. Moreover the other important stake holders – Government officials and bankers need to be imparted with the WBCIS product and process
appreciation programmes, well in advance. More importantly, the role of the insurer is vital in this regard on setting systems for ensuring transparency by sharing the daily weather data to stake holders apart from ensuring prompt claim settlement.