Crop insurance is the main rural insurance wherein the product, price and income risks are insured. If the farmers do not get a standard amount of product, required price and income from the farms; they are compensated by insurance companies under crop insurance.

In past insurance companies did not approach for the crop insurance because of non availability of records of land-ownership yield per acre, inputs used and expected outputs?

The scattered and fragmented land holdings posed other problems. Large varieties of crops, simultaneous harvesting, small premiums and non-availability of records of labor, cost and input costs have discoursed the insurer to insure the crop risk.

The General Insurance Corporation of India had prepared are approach of crop insurance in 1979. The area yield for each to tensile and block have be standardised and was compared with the actual yield to find out the indemnity amount.

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It has paved the way for Comprehensive Crop Insurance Scheme (CC1S) in 1985 which was later on modified as National Agricultural Insurance Scheme (NAIS). At present NAIS has covered 30 million hectares of cropped area for 18 million farmers throughout the country.

Area Based Insurance:

The natural hazards differ from state to state and district to district in one state. Weather indices have been prepared to decide the indemnity amount. The catastrophic income losses have been estimated for each year. Area based crop insurance covers the risks of drought, flood etc. in the respective districts and tehsils.

The crop insurance covers these, the value of protection desired for meeting the cost of cultivation and value of production etc. Farmers in the same region will receive the same rate of payment of claims in the area. The area based rainfall data is used for deciding the premium amount and claims to be paid in the area.

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Rainfall Index :

The rainfall indexes of the last 30 years are used to demonstrate the rainfall index. It is decided weekly for 30 years to know the capped rainfall. The average of the week of the month in each year is taken for 30 years.

Thus the average arrived at is modified with 2 standard deviation to find out the copped rainfall of the week of the month. If the rainfall in less than capped rainfall, the payment is made proportionately.

Similarly multiple weather parameter such as rainfall, temperature, frost, humidity, wind speed etc., are decided for fruits and vegetable insurance.

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Revenue Insurance Products :

Besides products, price is another factor of loss to farmers. For example, despite normal production, farmers often fail to maintain their level of income due to price fluctuations. Government has introduced Farm Income Insurance Scheme (FIIS) during Rabi 2003-2004 season. It encourages crop diversification for cash and ready income.

Individual farmers are also assessed for payment. Plant risks have been the significant example of such insurance. The resource poor farmers can get the insurance protection at the behest of the government’s premium.

The banking institutions and other financial institutions can ask for crop insurance so that their dues can be paid in time.