CROP INSURANCE

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

Definitions of Crop insurance on the Web:

 Crop insurance is purchased by agricultural producers, including

farmers, ranchers, and others to protect themselves against either the
loss of their crops due to natural disasters, such as hail, drought, and
floods, or the loss of revenue due to declines in the prices of
agricultural.

 Insurance covering growing crops against hail, wind, and fire.

Protection against a broader range of perils can often be arranged as
well.

Objective of Crop Insurance

New methods cultivation and high yielding crop have been developed
in country in the areas of food crops and commercial crops. In spite of these
development, the Indian farmers still have to bear heavy losses from
unfavourable climatical conditions. Most of the agricultural based countries
do not have suitable means or resources to overcome such losses arising out
of failure of crops. The objectives of crop insurance is to indemnify the
farmers from the losses occuring due to the following causes:

(1) Climatical uncertainties like draughts, floods, heavy storms and

cyclones, etc.
(2) Diseases spread in crops and plants.
(3) Damages to crops from the spread of insects and pests.
(4) Riots and strikes, etc.

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 CROP INSURANCE

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.

 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.

 Yield Variation
Crop insurance is designed to pay the difference between your
expected crop yield and the actual yield. Therefore, the variation
between these two numbers dictates how much insurance coverage you

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 CROP INSURANCE

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.

 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.

 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 since
you may actually profit from it while being protected against losses.

 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.

Crop Insurance Information

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 CROP INSURANCE

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 crop
and 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.

 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 protect
their 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.

 Guidance

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 CROP INSURANCE

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.

 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.

 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.

 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.

History of Crop Insurance

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 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.

2. The First Crop Insurance

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 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 the
crops covered and the regions of the country where coverage was
available. This expansion encouraged greater participation by farmers in
the program.

4. More Changes

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 CROP INSURANCE

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 caused
farmers 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.
Advantages of crop insurance

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 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 crop
insurance provides a regular income and extends supports to increase
purchasing power of the farmers.

7. Assistance to industries

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 CROP INSURANCE

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 agricultural
production. Its acts as a coordinating agency of the government in the
development of agriculture in the country.

Types of Crop Insurance

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 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.

 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.

 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
counties that are hard-hit by weather events in growing seasons, and
useful for farmers since they tend to cost less than MPCI.

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 CROP INSURANCE

 CRC
CRC, or crop revenue coverage,bases insurance payments on the
revenue 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.

 CAT
CAT stands for catastrophic coverage, which covers losses below 50
percent of the farmer's average yield. This type of insurance was created
due 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.

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
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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

 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.

 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.

 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
and return the appointment documents along with a copy of your new
insurance license.

 Learn the product. Once you are appointed with your chosen
insurance carrier, contact the sales department to request marketing

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material for the crop insurance products. Examine the material to

become familiar with the specific coverage provided by the policy, as
well as any limitations contained within the contract.

 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

 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.

 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.

How to Sell Agricultural Insurance

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Beginning 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
agricultural insurance 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

 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.
 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
specifically geared toward protecting insurance agents in the event of

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 CROP INSURANCE

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 properly
suited to your needs and available budget.
 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. Complete
the 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.
 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 prominent
among 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.
 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.

Tips & Warnings

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 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 toward
your advertising efforts.

 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.

The Role of Insurance in Financing Agriculture

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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.
 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.

 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.

 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.

 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 determines
premium costs and operating expenses. Farmers now worry that federal
budget cuts proposed as of January 2010 will adversely affect them.

 Assistance

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 CROP INSURANCE

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.

New insurance lets farmers down

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 CROP INSURANCE

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 advance
relief 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.

Crop Insurance In India

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 CROP INSURANCE

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 time
of 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.

What is kharif and rabi crops

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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 .

CROPS COVERED

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 CROP INSURANCE

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

SEASONALITY DISCIPLINE:

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

under
Activity Kharif Rabi
Loaning period April to October to
September March
Cut-off date for receipt of November May
Declarations
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.:
 Natural Fire and Lightning
 Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado
etc.
 Flood, Inundation and Landslide
 Drought, Dry spells
 Pests/ Diseases etc.
Note: Losses arising out of war & nuclear risks, malicious damage & other
preventable risks shall be excluded.

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 CROP INSURANCE

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.

Premium Rates:

S Season Crops Premium rate

N
.
1. Kharif Bajra & Oilseeds 3.5% of SI or
Actuarial
rate, which ever is
less
    Other crops (cereals, other millets & 2.5% of SI or
pulses) Actuarial
rate, which ever is
less
2. Rabi Wheat 1.5% of SI or
Actuarial
rate, which ever is
less
    Other crops (other cereals, millets, pulses 2.0% of SI or
& oilseeds) Actuarial
rate, which ever is
less
3. Kharif & Annual Commercial annual Horticultural Actuarial rates
Rabi crops

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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 insurance
business.
Agriculture Insurance Company of India
Agriculture Insurance Company of India

Incorporated on 24-Nov-00

13th Floor, “AMBA DEEP?

 14,Kasturba Gandhi Marg,
Connaught Place,
 New Delhi - 110001,
Address
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 aicho@aicofindia.org
Website www.aicofindia.org

Chat NA

Agriculture Insurance Company of India Company Details, Profile, Address

About Agriculture Insurance Company of India Limited

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 CROP INSURANCE

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 a
sustainable 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 and
paid 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.

Product and Services

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 CROP INSURANCE

The company at present offers the following schemes :

 NAIS- National Crop Insurance Scheme

 WBCIS - Weather Based Crop Insurance Scheme
 Wheat Insurance (Weather & Biomass)
 Rabi Weather Insurance
 Mango Insurance
 Poppy Insurance
 USBY - Uttarakhand Seb Bima Yojana (Apple Insurance)
 Potato Insurance
 Grapes Insurance
 Varsha Bima/Rainfall Insurance
 RISC - Rainfall Insurance Scheme for Coffee Growers (Coffee
Insurance)
 Bio-Fuel Tree/Plant Insurance
 Pulpwood Tree Insurance
 Coconut Insurance
 Rubber Insurance

POTATO CROP INSURANCE

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 CROP INSURANCE

1. Unique

parametric insurance based on named perils linked to plant population

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

areas

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

4. Based on partnership model of “grower – producer – financier –

insurer”

This insurance policy is applicable to Potato crop cultivated by the

farmers 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 against
pecuniary loss suffered by the insured in respect of the cost of inputs on
account of the loss or damage (death/ total damage of the plants leading to
reduction of the plant population below the threshold number) due to the
happening of the insured perils. It shall not apply to the loss of
yield/production of potato crop resulting from the insured perils. The policy
shall cover and indemnify the insured (in accordance with the claim
assessment procedure) in the event of damage of potato crop leading to
reduction of plant population below a threshold limit, occasioned by natural
calamities like Flood, Cyclone, Storm, Frost and Pest & Diseases (except
Late Blight) etc. either in isolation or concurrently during the period of
insurance.
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 CROP INSURANCE

Claim Procedure
On happening of any loss or damage, the insured shall give notice to
the 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 shall
tender to AIC all reasonable information, assistance and proofs in
connection 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 as
specified in the policy, which shall be deemed to have been incurred at a
percentage corresponding to the stage of cultivation. The amount of loss
assessable 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 loss
operates, subject to the terms, conditions, salvage, excess and any other
deductions.The insured shall be required to furnish proof of insurance and
any other document / proof specifically requested by AIC for the settlement
of the claim.

WHEAT INSURANCE POLICY

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 CROP INSURANCE

(Based on Temperature & Biomass/Crop Vigour)

1.Unique Index insurance product based on biomass (Normalized Difference

Vegetative 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 crop
vigour stage provides effective risk management aid to those wheat farmers
who 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 be
independently verified & measured and accurate. It allows for speedy
settlement of indemnities, even before the crop is ready for harvesting.

Coverage

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 CROP INSURANCE

Agriculture Insurance Company hereby agrees, subject to the terms,

conditions and exclusions herein contained, or otherwise expressed herein to
compensate the insured, in the manner specified herein, against the
likelihood 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 (in degree centigrade) consecutively for specified number of
days above specified levels in the 1st and / or 2nd fortnight of March as
measured at RWS.

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 (scaled
value) falls short of the specified trigger level,
the benefit payable to the insured shall be a sum specified corresponding to
the trigger level; and/or In the event that, in the geographical location and
during the season specified in the Schedule to this policy the maximum
temperature of specified number of consecutive days, as recorded at RWS is
higher than the specified trigger levels during 1st fortnight and / or 2nd
fortnight, the benefit payable to the insured shall be a sum specified
corresponding to the trigger level.

Premium
Premium chargeable would be statistically/actuarially calculated
based on the geographical area, the triggers specified and the biomass and
temperature patterns of the specified geographical area in the historical
periods.

Crop Insurance Schemes in India:

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 CROP INSURANCE

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 charges
which 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 premium
rates 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.

Object: the objects of this scheme are:

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 CROP INSURANCE

(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.

Features of the scheme

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 CROP INSURANCE

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 Credit

Where 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 central
government and General Insurance Corporation.

5. Creation of ‘Insurance Fund’

The central government has created a fund called ‘Insurance Fund’ for
the crop insurance plan. similarly, such a fund was created by every
state government.

6. Premium
 The premium rates are too minute. The present rates are as
follows:
 In the case of wheat, paddy and millet, sum equals to 2 per cent of
the sum insured.
 In the case of oil seeds and spices, sum equals to 1 per cent of the
sum insured.

7. Assistance Towards Premium

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 CROP INSURANCE

per cent of the premium is provided to small and marginal farmers by

the 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 ruled
provinces 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 ‘Crop Insurance Cell’ at every
state capital.

11.The Functions of Central Insurance Fund

 To collect the crop insurance premiums of the policies being
issued and from financial institutions.
 Settlement of claims immediately.
 Giving all technical guidance and supervision of the state funds.
 Collection and dissemination of statistical information
 To motivate the state government for needful marketing and
publicity matters.
 To establish coordination between crop insurance and
agriculture development programmes.

12.Role Of State Governments

 The role of state governments in the crop insurance scheme is as
under:
 To delegate power to State Crop Insurance Fund to act as co-
insurer for all the crop insurance policies issued in the state.

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 CROP INSURANCE

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

marginal farmers against insurance premiums.
 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.

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 CROP INSURANCE

Crop insurance scheme old and new

parameter Old scheme (NAIS) Modified scheme

(MNAIS)

Insurance unit District Village panchayat

Early settlement Based on final yield Up to 25% of likely total
estimates submitted by claims
government of state
Pre-sowing/ Not covered Prevented/ failed sowing
planting risk risk to be covered up to
25% of sum insured
Indemnity levels 60%, 80%, and 90% 70%, 80%, and 90%
Compulsory/ Compulsory for farmers No change
voluntary nature who take loans and
voluntary for farmers
who don’t take loans
Localized Not covered Individual claim
calamities assessment in case of hail
storm, landslide
Post -harvest losses Not covered Post-harvest losses due to
cyclones to be covered in
coastal areas
Weather factors Different for farmers Uniform for farmers who
who take loan and those take loans and those who
who don’t don’t

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 CROP INSURANCE

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 this
scheme 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.

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 CROP INSURANCE

AREA APPROACH AND UNIT OF INSURANCE:

The scheme would operate on the basis of “Area 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 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 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 be
calculated 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.

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 CROP INSURANCE

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. /UT
Administration 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 the
proposal 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

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 CROP INSURANCE

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

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 CROP INSURANCE

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 the
individual 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.

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 CROP INSURANCE

Weather 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

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 CROP INSURANCE

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.

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 CROP INSURANCE

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 Cycle

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 CROP INSURANCE

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 of
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.

2. Acceptance

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 CROP INSURANCE

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 of
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. If
prevented planting provisions apply, and the crop cannot be timely planted
due to the causes specified in the crop provisions, such acreage may be

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 CROP INSURANCE

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 of coverage and premium for the crop. Insurance providers may
deny coverage if 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.

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 CROP INSURANCE

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 cancellation
date 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.

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 CROP INSURANCE

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.

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 CROP INSURANCE

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:

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

Seasonal Agricultural Operations (SAO) loans from Financial Institutions
i.e. Loanee Farmers.
 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.
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 CROP INSURANCE

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

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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 Agency

shall 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 ‘Area 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. The
Defined 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

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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 Unit Area Minimum number of

N. C.C.E.s required to be
done
1. Taluka/Tehsil/Block 16
2. Mandal/Phirka/any other smaller unit area comprising 10
8-10 villages
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 ‘Actual 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 ‘Threshold Yield’ (TY), all the insured

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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 1 st year, 80% in 2nd year,
60% in 3rd year, 40% in 4th year, 20% in 5th year and ‘zero’ 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

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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 good
network). 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 modifications

as 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 ‘GIC of India’ will
continue to function as the Implementing Agency.

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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 entire
community 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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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 and
produce agricultural commodities.

Flood
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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 and
creates 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 drinking
water 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:

 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 latest
weather situation and crop advisory prepared by the Indian Council of
Agricultural Research.
 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
of drought. The Central Government then aides the financial and
institutional processes to provide relief to the affected.
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 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 the
form 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 bilateral
programmes 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 top
professionals 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.

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

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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 .

Case study
ICICI Lombard to Provide Weather Covered In 10 State
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ICICI Lombard General Insurance Company has been given the mandate to

provide weather-based crop insurance for rabi season (2010-11) in Madhya
Pradesh, Bihar,Tamil Nadu, Karnataka, West Bengal, Chhattisgarh, Jharkhand and
Himachal Pradesh.

    The insurance company will cover 69 districts — 30 loanee districts

(farmers who have taken loans) and 39 non-loanee districts. The major crops that
ICICI 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 risks

such as excess or deficit rainfall, variations in temperature and fluctuations in
humidity. Thisscheme facilitates immediate compensation based on certified data
collected from independent third party bodies such as Indian Meteorological
Department (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 lakh

acres 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
variation in agriculture production. Weather insurance protects the farmer against
financial loss arising out of adverse weather conditions. We consider it to be our
privilege to have been chosen to provide weather-based crop insurance for farmers
in 10 states."
 

Indepth Study of Farmers’ Suicides, their 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

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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 a
State like Punjab with large areas under irrigation. With the preoccupation of the
Government with the rate of economic growth and promotion of the private sector
in the secondary and tertiary sectors, that is, industrial and service sectors, the
agricultural sector and the sector of rural development were neglected. The
government 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 when
the stock exchange rose. The Reserve Bank, forgetting its responsibility for the
agricultural and rural sector, started concentrating on what it considered to be its
legitimate concern, namely, monetary policy and sound banking, mainly measured
in terms of profit and loss. It is estimated that more than one-and-a-half lakh
farmers committed suicide. This is indeed a black mark on the economic
performance 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 then
Chief Minister of Andhra Pradesh, Chandrababu Naidu, looked upon themselves as
the CEOs of their States and found a sense of achievement in making Bangalore
the Silicon Valley of India and Hyderabad, a cyber city. While they thought that
this was the touchstone of their achievement, the rural voters suffering from
drought rejected them and both lost power. In Maharashtra, the government
neglected the phenomenon which was most striking in the Vidarbha area, until the
High Court got seized of it and asked the Tata Institute of Social Sciences to study
the subject. The Government of Maharashtra then woke up and asked the Indira
Gandhi Institute of Development and Research to make a survey and submit its
findings. The Planning Commission also sent a team at the instance of the Prime
Minister to study the causes of farmers’ suicides and propose suitable measures
and programmes. The State Government under pressure made some provisions and
after the Prime Minister’s visit, the Central Government provided a financial
package. Both these failed to stem the tide of farmers’ suicides, suggesting that the
package was not based on a correct understanding of the causes of farmers’
suicides. As the general elections are drawing near, the Finance Minister, in his
Budget speech, made a dramatic announcement of the write-off of loans of small
and marginal farmers and made a provision of Rs 60,000 crores, later increased to
Rs 71,000 crores, to enable the banks to write off the loans. This still leaves out the
farmers’ debts to the private moneylenders, which are a substantial part of
indebtedness. In the era of neo-liberalisation, since 1991, the nationalised banks
started reducing their commitment below the prescribed 18 per cent, while the
cooperative banks turned sick and failed to provide adequate credit. This forced the

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farmers to turn from institutional credit to the moneylenders, despite the usurious
interest rates charged by them.

THE problem cannot be solved unless the causes of farmers’ suicides are
properly pinpointed and comprehensive policies and programmes are formulated.
This is what the book under review endeavours to do. It concentrates its research
on the districts in the Vidarbha area, whose epicentre is the Yavatmal district. The
study, based on a wealth of statistics and case studies, shows that farmers commit
suicides because they are driven to do so by the desperate conditions in which they
find themselves. These farmers belong to different caste groups and not only small
and marginal farmers but even those owning larger holdings, which in the context
of dry agriculture are not enough to enable the farmers’ families to eke out
livelihood. The suicide of the breadwinner, whether young or old, leave the
families desolate and disrupt the social order. The causes of farmers’ suicides are
both economic and social. The economic causes are :
 (i) growing expenditure, specially on bought inputs
 (ii) low productivity
 (iii) inadequate prices of agriculture produce
 (iv) difficulties in marketing and marketing hazards
 (v) natural hazards caused by drought
 (vi) absence of proper crop planning
 (vii) unsatisfactory agriculture credit
 (viii) accumulated burden of debt

Amongst the social causes are :

 (i) the drinking habit which atrophies the productivity of the farmer
 (ii) extravagant expenditure on marriages
 (iii) bad health and illness and inability to meet the necessary expenditure on
medicine and health servicesThe study rightly comes to the conclusion that unless
all these causes are simultaneously dealt with the situation cannot improve. It
requires large public investment in irrigation and rural infrastructure, rejuvenation
of the cooperative credit, marketing and processing system, strengthening of the
agricultural extension services and sympathetic administration working closely
with the farming community.Prof Dubhashi is a former Vice-Chancellor, Goa
University, and an erstwhile Secretary, Government of India.

conclusion

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This fundamental principle of insurance is critical to an understanding of the

history 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.

BIBLIOGRAPHY

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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

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