INSURANCE SYSTEM-ADAPTING FOR PROTECTION AGAINST DRAUGHT

Crop insurance scheme was introduced in India in 1985 and later modified under the National agricultural Insurance Scheme in 1999. The premium is about 2% of the insured amount for cereals and millets and 5% in case of pulses and oil seeds. But the existence of this scheme has not deterred hundreds of farmers from committing suicide due to drought and crop failure. Probably drastic changes may be needed to suit such schemes to the needs of millions of farmers depending on timely rain for cultivating their land. Based on a study of 37 insurance schemes working in different countries, a comprehensive weather index based insurance scheme has been arrived at internationally worthy of consideration.

"Weather index based insurance sets out an objective parameter, such as the level of rainfall, at a specific location, during an agreed period. The terms of the contract correlate as closely as possible with the loss of agricultural production suffered by the farmer. All policyholders within the same area receive payouts based on rainfall measurements at the weather station close to their farms, eliminating the need for expensive, time-consuming loss assessments in the field. Ethiopian bean farmer Shuma Bejiga took part in one of the insurance programmes that was examined in the study. He received an insurance payment in 2009, after two successive years of poor rains."We were expecting the short rains in March and April but they only started in June. To make things worse, the rain then stopped at the flowering stage of the crops, so they never had a chance to develop," said Shuma, who supports his wife and ten children with the proceeds of his farm. "This insurance payment is the first I have received and it covers much of my loss. I really appreciate the payment; it will at least take us through the next few months."

The insurance instrument is becoming increasingly important in a world where uncertainties loom large at every corner causing misery and suffering to those affected. The monolithic giant in India, Life Insurance Corporation (LIC) is considered one of the biggest players,especially in the field of life insurance. Then there are many private insurance companies providing cover for the "unexpected" contingency in practically every area including automobiles, dwelling houses, fire, floods, natural calamities, health etc, the premium payments depending on the relative degree of risks involved. But why the farming operation is not attracting the attention of these insurers is some what perplexing. Could it be that the farmer is not a dependable entity, worthy of trust and defaulting on premium payment could be unacceptably high? Is it not possible for GOI to formulate a confidence boosting insurance scheme covering all farmers vulnerable to crop failure that will give them some security against a contingency? In stead of wasting billions of rupees in the form of subsidy to the farmers or for loan waiver, even a fraction of this outgo can put in place an insurance system that will compensate the farmer and prevent him from committing suicide out of desperation.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com