Different Approaches of Crop Insurance in India

Raju Choudhary November 9, 2015 Leave a comment

Contents

Individual Approach

Area Approach

Weather based insurance

Different Approaches of Crop Insurance in India, Types of Crop Insurance in India. In 1976, an
expert committee headed by V M Dandekar looked into issues and modalities of crop insurance in
India (Dandekar, 1976) and revisited the Dharam Narain Committees views(Vyas & Singh, 2006). In
the report, the committee was of the view that individual approach was the ideal approach. Now you
can scroll down below n check more details for Agricultural Insurance in India

Individual Approach
Advantages of Individual Approach
1) The farmers can get indemnity based on their normal output for the last few years
2) In case of area approach if there is bad crop all the farmers in the particular area are to be paid
the amount of indemnity but here only the farmers who have output less than normal output are paid
by the indemnity
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Disadvantages of Individual Approach
1) It is a more costly approach as normal output, amount of premium and indemnity of each farmer
has to be assessed separately.
2) Large amount of statistical data for each farmer is required for actuarial calculations, which may
not be available.
On the basis of the recommendations of the Dandekar Committee Report the Pilot Crop Insurance
Scheme (PCIS) was put in place in 1979-80 which was based on homogeneous Area Approach (see
Box 2). From the actuarial standpoint, a crop insurance scheme based on the Area Approach is a fair
betting system based on an independent chance-system (Dandekar, 1976).
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Area Approach

Advantages of Area Approach

1) In area approach the crop-outputs of individual farmers need not be ascertained.
2) All farmers are paid indemnity at uniform rate.
Disadvantages of Area Approach
1) The payments are made after properly planned crop-cutting experiments, which may delay the
process of payment.
2) Since all the farmers get indemnity at uniform rate, individual losses suffered by the farmers may
not be always answered.
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In 2013 another scheme namely Weather based Crop Insurance Scheme (WBCIS) was introduced.
Weather Based Crop Insurance aims to mitigate the hardship of the insured farmers against the
likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse
conditions of weather parameters like rainfall, temperature, frost, humidity etc. While Crop Insurance
specifically indemnifies the cultivator against shortfall in crop yield, Weather based Crop Insurance is
based on the fact that weather conditions affect crop production even when a cultivator has taken all
the care to ensure good harvest (AIC). It too operates on the concept of Area approach.

Weather based insurance

Advantages of Weather based insurance
(i) Since in India agricultural output is heavily dependent on rainfall, this scheme is better than
others.
(ii) The settlements of indemnities are done within a fortnight.
(iii) Here the indemnity is not dependent on crop cutting experiments so a parity is maintained in all
the fileds.
(iv) The sum insured is kept between cost of production and value of production
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Disadvantages of Weather based insurance

(i) It will be an expensive scheme to implement as many weather stations are to be set up so that
accurate weather data is available.
(ii) Cultivators participating in this type of insurance cannot participate in any other insurance
schemes, so if loss is occurring due to any factor other than weather conditions it will not be covered
under this insurance.

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