Solving the age-old problem, Agriculture Insurance Company of India Limited, a nationalized insurance company, introduced “parametric insurance” to protect crops against the vagaries of the weather. AIC has worked to collate the data with several credible weather data agencies such as IMD, Skymet Weather and private / government vendors / agencies who have installed automatic weather stations at various PAN India locations.
Agriculture Insurance Company aims to cover all Indian companies and affinity groups and / or individuals who own establishments or businesses, whose income may be affected by variation in crop yields due to adverse weather conditions. The insurance program involves the monitoring of various weather and crop parameters through automated weather stations and based on these parameters a crop specific index is derived and the most suitable insurance product is created for a specific culture.
Adverse weather conditions indicated by direct indirect weather indicators are the trigger events for this insurance coverage. Payments are made when the deviation of the weather index exceeds a predetermined threshold which is detrimental to crop growth. For example, the precipitation parameters are deficit rainfall coverage, excess rainfall coverage, non-seasonal rainfall coverage, coverage for inadequate rainfall distribution, coverage for wet periods, etc.
The company piloted the product with a leading warehousing company that is an agribusiness value chain integrator in India, focusing on ecosystem catalysis for smallholder farmers and farmers. farmer organizations through post-harvest interventions that include storage solutions, credit and risk guarantees, financial and market linkages, and policy changes. Agriculture Insurance Company has covered 281 warehouses with this product during the current season, located in various states including Bihar, Madhya Pradesh, Maharashtra and Rajasthan.
Siddesh Ramasubramanian, Appointed Actuary and Chief Risk Officer of the Agricultural Insurance Company noted, “The volatility of crop yields is a huge risk in India, as Indian agriculture mainly depends on the monsoon. Due to bad weather in Maharashtra, there were crop losses which resulted in consequent losses for warehouse owners. There was a claim of 6.77 lakh against the premium of 4.64 lakh i.e. a claim rate of 145%. “
He added: “52% of Indian agriculture is rainfed, parametric insurance can be a great added value to protect crops and stakeholders against climatic hazards and their impact.“
The insurance is customizable according to the season and the type of crop. Thanks to technological intervention, claims settlement processes are faster, more efficient and transparent, without any subjectivity.
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