Presented By- Vijendra Singh Under guidance of Mr.Vikas Bhuwania Prof.

Satish Kumar
Assistant Manager J K Risk Managers & Insurance Ltd.
Professor I.T.S. Gzb.

All over the world agriculture is synonymous with risk and uncertainty. Crop insurance helps in stabilization of farm production and income of the farming community. It helps in optimal allocation of resources in the production process. Indian Government has been concerned about the risk and uncertainty prevalent in agriculture. This project is basically to study the distribution network set up in the rural area of Haryana and Punjab and find out the optimum strategy to built up the effective distribution network for crop insurance. The project has been done in partial fulfillment of PGDM program of ITS, GZB and JK RISK MANAGERS AND INSURANCE BROKERS LTD.

About the Insurance Sector in India:Insurance sector is an opportunity for India. This business is growing at the rate of 18-22 per cent annually. Presently it covers market of RS.450 billion. Together with banking sector it contributes about 7% to GDP. Gross premium collection is about 2% of GDP. This is an indicator that growth potential for the insurance sector is immense. y Insurance sector contribute a lot in economic development. y It provides long term fund for infrastructure development. y It is estimated that over the next ten years India would require investments of the order of one trillion US dollar.
y y y y y y

The largest market in the world with 700 million Rural Folks.  With growing purchasing power and increasing aspiration level.  Growing uncertainty in weather and monsoon.  Growing awareness level in farming techniques.  Government concern about the educated and productive farming.

Crop Insurance
y The government of India started offering widespread crop

in insurance in 1985, with the Comprehensive Crop Insurance Scheme. Crop Insurance



Risk Cover in Crop Insurance
WBCIS scheme  Temperatures(high as well as low) NAIS scheme  Fire & Lightning  Storm, Cyclone, Hailstorm, Typhoon, Tempest,Hurricane, Tornado  Flood, Inundation & Landslide  Drought, Dry spells  Pests / Diseases 

Wind Speed(high wind speed) 

Rainfall (excess, deficit and consecutive dry days)

A comparative study of WBCIS & NAIS
y Parametric weather related risks like y Practically all risks covered

(drought, excess rainfall, flood, hail, rainfall, frost, heat (temperature), pest infestation, etc. humidity etc. are covered. y Easy-to-design if historical y Technical challenges in designing yield data upto 10 years¶ is weather indices and also correlating available. weather indices with yield losses.
y Basis risk with regard to weather ‡ High basis risk [difference

could be high for rainfall and moderate for others like frost, heat, humidity etc. y Objectivity and transparency is relatively high.

between the yield of the Area (Block / Tehsil) and the individual farmers]. y Objectivity and transparency is relatively less.

y Quality losses to some extent y Quality losses are beyond

gets reflected through weather consideration. index. y No loss assessment costs. y High loss assessment costs. y Faster claims settlement. y Delays in claims settlement. y Government¶s financial y Government¶s financial liabilities could be budgeted liabilities are open ended, as it up-front and close ended, as it supports the claims subsidy supports the premium subsidy. recipe.

Main flaw of NAIS scheme
y Lofty goal of financial viability. y Mandatory for loanee farmer. y Adverse selection, in the case of non-loanee farmers. y Premium do not equal at risk level. y The area approach.

Main flaw in WBCIS scheme
y Only weather based risk are the part of risk covered. y No physical verification of field, its production capacity

and finally the production in field. y In some of the cases risk period starts middle of the seasons.

Distribution Network
y AIC & ICICI Lombard are two main players in WBCIS . y Agriculture Insurance Company of India Ltd.(AIC) has two insurance brokers to market their scheme-

(a) JK Risk Managers and Insurance Brokers Ltd. (b) Safeway ‡ JK Risk Managers and Insurance Brokers Ltd. is the following direct distribution network in crop insurance.

Direct Distribution
y Direct distribution means approaching to the customers directly without using any intermediary, sub-channels or network. y JK Risk Managers and Insurance Brokers Ltd. Is approaching to the farmers directly to get their crop insured. y They directly approaching to the farmers to sell the crop insurance policies of AIC.

Approach taken by JK Risk Managers and Insurance brokers Ltd.
y They directly meet to the farmers to sell their policies. y Meeting with the agriculture development

officers(A.D.O) & Sub divisional officers (S.D.O) , so that they can tell about the scheme , insurance policies and its benefits. y They convince and motivate these officers about the scheme ,so that they can motivate the farmers for crop insurance.

y JK also approaching to the sarpanch, nambardar, patwari

of villages, so that they can easily market their policies. y Another options are like Mandi Pradhan of local anaj mandi , Pesticides seller, Seed seller, so that JK can approach to their farmer & share croppers. y JK also approach to the IFFCO, HAFED, PACS for marketing purpose. y Some of local political background people also helping in crop insurance.

Strength Only two players are there, it makes easy to compete. JK is already exist in rural market with a renowned brand in

other industry and segments, which help them to market the policies.  No sub-brokers , sub-channel, means cost saving.  Market size is too much large, so need not to meet every farmers.

Weakness No regional and local office, this is main drawback for

JK.  Farmer can get information ,suggestion and complain only at the start of seasons, when JK executives will be there. No local and regional office, creates disbeliefs in the mind of farmers. Most of the times scheme comes only for one week or ten days, during this limited period its not easy to reach in every village, and follow them. 

Although farmers are agree to buy the policies , but

having 2 to 3 executives its not possible to follow all of them, within the limited span of time.

OpportunitiesHuge untapped market is still there ,like Uttar Pradesh,

Bihar etc. There are a few players in this segment , lots of opportunity to become market leader as an insurance brokers.

ThreatsSince there is huge potential in crop insurance , so big

corporate houses may enter in this segment , which one are already in insurance sector. Ex- Reliance, Tata, Birla etc.  Because of no local and regional branches, reaching would be more difficult in order to compete with the rivals in coming future.

Strategies to develop effective distribution team 
Build up a team which consisting of local people like

sarpanch, nambardaar, patwari etc , and tell them benefits of crop insurance. Motivate the people for crop insurance by telling them about the effect of climate change which leads to lower/uncertain productivity of crops.  If these people get motivated, they would be a effective channel for us, because rural people and farmers having a kind of beliefs in them. 

The local seeds and fertilizers dealers are directly

connected with the farmers. They can be a good source to channelize the business.  With the help of local people, we can easily market our product within a limited span of time.  Get connected with the local mass leader and communicate them about new upcoming scheme so that they can make people aware and create goodwill. If possible give them some incentives.  JK should provide some specialist in agriculture who can tell people about the new ideas of agriculture and indirectly promote risk insurance. In this way they can built up CRM as well as get business. 

JK should open a local fund collection house(Depot), so

that the loyal customer as well as aware farmers can get their crop insured easily. Which save the time of customers as well as of the organization and expand the business.  The above mentioned plan will incur high initial cost to the company, but this will be a very beneficial to the organization to mobilize the business. Also it would be proved as a competitive advantage over forthcoming competitors.

There are millions of farmers in India who work the hardest and yet seem to suffer the most. Their occupation is fraught with the highest risk as it is totally at the mercy of nature. Enormous market opportunity attracting big corporate houses in this segment. So now the time for focusing upon the distribution strategies, so that competition can be easily handled, because in every industry distribution network plays a vital rule in the success of the firm and organization.

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