What is Crop Insurance? | Crop Insurance Schemes in India

What is Crop Insurance?

What is Crop Insurance?– Crop or Agriculture Insurance covers risks of anticipated loss in yield of various crops. mostly the entire Crop Insurance business comes from Schemes or curricula. These Crop Insurance Schemes operate on the Theory of the ‘Area Approach.

Coverage is mandatory for planters taking crop loans from rural financial institutions (RFIs) for the cultivation of crops, i.e., loanee farmers. Non-loanee Kisaanon can also insure their crops under the same yojana.

The main Schemes available to farmers in respect of crop insurance are as under:

a) National Agricultural Assurance Scheme (NAIS) of Government of India

b) National Crop Insurance Programme (NCIP) of Government of India

i. Modified National Agricultural Insurance Scheme (MNAIS),

ii. Weather Based Crop Insurance Scheme (WBCIS) and

iii. Coconut Palm Insurance Scheme (CPIS) 

a) National Agricultural Insurance Scheme (NAIS)

NAIS was introduced in the year 1999 and is presently in operation in a few states. Scheme 3 is practically an all-risk insurance cover based on ‘Area Yield Index.

• Which are the crops covered: 

The Scheme veil all food, oil seeds, and yearly commercial / horticultural phasalon for which historical produce data is available and crop cutting usage is planned for the current year. State governments issue notices containing names of crops, areas Cupule for insurance, rates of premium, etc. at the beginning of each cropping season. 

• Who can insure: 

The Scheme is acquirable to all Farmers – compulsory for best farmers and optional for non-borrowing farmers. Farmers have to fill up a simple Proposal Form and submit the same with a premium amount at the nearest branch of the bank or Primary Agricultural Credit Society.

• What is Sum Insured and Premium:

 Sum Insured is at least equal to the loan amount which can be increased to 150% of the value of the average yield at the option of the farmer. There are limits for non-loanee farmers which are published in the state government’s notification. Surcharge rates for Food crops and Oilseeds range from 1.5 percent to 3.5 percent and actuarial rates are charged for Annual Commercial / Horticultural Crops. Subsidy in premium is available to small and marginal farmers at 10% of the premium. Some State governments offer Surpassing subsidies.

• Where to pay a premium (Intermediary):

Network of pecuniary institutions viz. commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country, play the role of intermediaries. The scheme operates broadly on the bancassurance model.

• Levels of indemnity

Levels of indemnity are 60%, 80%, and 90% which means farmers are themselves to bear the loss of the first 40%, 20%, or 10% respectively. This Term is also Extensively called ‘deductible’. 

• What is the procedure for claims:

The Scheme operates on principles of Area- product Index or Guarantee. There is a guaranteed yield defined as the Threshold Yield for every crop in every Identical Area e.g. taluka, block Village panchayat, etc. Threshold Yield is the moving average of the past five years’ actual yield (three years in the case of Paddy and wheat) multiplied by the applicable level of indemnity. If the present season’s Real yield recorded is less than the Threshold yield, then claims become to be paid. 

Yield data used for claims is generated under General Crop Calculation Surveys (GCES) by way of crop-cutting check-ups. The procedure of assessment and Where to pay premium (Intermediary) Resolution of claims are automated processes and the claim raashi is credited to the insured farmers’ bank account. No paperwork is required to be done by insured farmers or intermediaries.

b) National Crop Insurance Programme (NCIP)

 NCIP has three components- viz. MNAIS, WBCIS, and CPIS. There are some common features for MNAIS and BCIS components i.e.

1. Private sector insurance companies are allowed as ‘implementing agencies.

2. Rates of premium are charged on an actuarial basis. Actuarial rates of premium help insurance companies transfer the risk in the global reinsurance market and the governments budget their liabilities.

3. Premium payable by farmers is subsidized substantially to make it affordable.

4. Sum insured is broadly equal to the cost of cultivation.

5. All claims will be paid by the insurance company as there will be no sharing of claims by state and central governments. 

Component – I: Modified National Agricultural Insurance Scheme (MNAIS)

• Which are the crops covered:

 The Scheme covers
all food, oilseeds, and annual commercial horticultural crops for which historical yield data is available and crop-cutting experiments are planned for the current year. State governments issue notifications containing names of crops and areas eligible for insurance, rates of premium, etc. at the beginning of each cropping season. 

• Who can insure: 

Available to all Farmers – compulsory for borrowing and optional for nonborrowing farmers- who have to fill up a simple Proposal Form and submit the same with the premium amount in the nearest branch of the bank or Primary Agricultural Credit Society.

• What is Sum Insured and Premium:

Sum Insured is based on the cost of cultivation and at least equal to loans disbursed. Often the State government decides the sum insured for various crops for a district within the State. Sum insured can extend up to the value of Threshold Yield. Premium rates vary from crop to crop and area to area based on risk profile reflected in historical yield data, past insurance, and claims experience.

• Where to pay a premium (Intermediary):

A network of financial institutions viz., commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country plays the role of intermediaries. Additionally, insurance intermediaries licensed by IRDAI are also allowed to ensure non-loanee farmers.

• Levels of Indemnity:

Levels of Compensation are 80% and 90% which means farmers have to bear the first 20% or 10% of losses Serially.

• What is the procedure for claims:

Operates on principles of Area-Crop Index or Guarantee. The guaranteed yield termed as Threshold Yield for every crop in every Homogenous Area e.g. taluka, block, or gram panchayat, is based on the past seven years’ moving average yield with a provision for excluding yields of a maximum of two calamity years. The other process is the same as the NAIS. 

• New provisions on claims:

MNAIS provides additional features in terms of coverage of ‘Prevented sowing’, post-harvest losses, individual farm level assessment in case of localized calamities, and On-Account settlement of claims in case of serious crop losses/major disasters.

Component – II: Weather Based Crop Insurance Scheme (WBCIS):

• Which are the crops covered:

The Scheme covers all food, oilseeds, and annual commercial/ horticultural crops. All crops for which historical yield data is not available can also be covered.

• Who can insure:

Available to all Farmers – compulsory for borrowing farmers and optional for non-borrowing farmers -who have to fill up a simple Proposal Form and submit the same with the premium amount in the nearest branch of the bank or Primary Agricultural Welfare Society. 

• Risks covered:

Major perils covered are deficit, excess and deviation of rainfall, relative humidity, temperature (high and low), wind speed, and a combination of the above. Risks of hail-storm and cloud bursts can also be covered as add-on covers.

• What is Sum Insured and Premium:

Sum Insured is pre-defined and is based on the cost of cultivation, and is decided by the state for each crop and district. Premium rates can be a maximum of 10% for Kharif and 8% for Rabi season with 12% for commercial/ horticultural crops. The premium subsidy achievable ranges from 25 to 50 percent.

• Where to pay a premium (Intermediary):

Network of Pecuniary institutions viz., commercial banks, regional rural banks, and cooperative banks, spread across the length and breadth of the country plays the role of intermediaries. Insurance intermediaries licensed by IRDAI are also allowed to ensure non-loanee farmers.

• What is the procedure for claims:

If the observed weather index value falls below or above (as the case may be) the notified trigger value, then claims shall be calculated per unit area. Claims are assessed and settled solely based on weather data of automated stations installed in the Reference Unit Area for the purpose. The calculation is done based on term sheets published in notifications. 

The procedure of Evaluation and settlement of claims are automated Procedures. No paperwork is required to be done by insured farmers or intermediaries. Losses for Add-on covers are assessed on a particular basis for which farmers have to inform the insurance company within 48 hours of the occurrence of the insured peril.

Component – III: Coconut Palm Insurance Scheme (CPIS)

This scheme operates largely like a non-life insurance policy. It is an annual contract, administered only by the Agriculture Insurance Company of India. 

• Who can insure:

Any palm grower having at least five healthy nut-bearing palms in a contiguous area is eligible to insure. Palms are insured in two categories viz., palms in the age group of 4 to 60 years in the case of dwarf and hybrid palms and 7 to 60 years in the case of tall variety.

• What is covered:

Storm, Downpour, cyclone, gale, tornado, heavy rains, flood, overflow, pests, diseases, accidental fire, Jungle fire, bush fire, lightning, tsunami, severe drought, and consequential total loss causing the death of palm or making it totally counter-productive. 

• What is not covered:

Loss due to theft, war, nuclear risks, rebellion, revolution, insurrection, mutiny, natural mortality, uprooting, etc.

• Sum Insured and Premium:

Sum Insured for palms within the age group of 4th to 15th year is Rs. 900/- and premium is Rs. 9.00 per tree while for palms within the age group of 16th to 60th year is Rs. 1750/- and premium is Rs. 14.00 per tree. A subsidy of 75% is available. The farmer pays only 25% of the premium amount.

• Assessment of claims:

Claims have to be intimate to the insurance company within 15 days from the incident of hazard. Claims will be assessed on an individual basis and the claim amount will be released to the insured farmer.

FREQUENTLY ASKED QUESTIONS

Q 1: What is crop insurance?

Ans: Crop insurance is an arrangement aimed at mitigating the financial losses suffered by the farmers due to harm and ruin of their crops resulting from various production risks.