Smallholder access to weather securities in India

Smallholder access to weather securities in India

7 July, 2020    

Weather-based insurance products insure farmers against production risks on the basis of a weather index that is highly correlated to local yields. Indemnifications are triggered by prespecified patterns of the index, as opposed to actual yields. This eliminates the requirement of on-field assessments for indemnification, thereby lowering administrative costs and time. Therefore, index-based insurance products have been regarded as having enormous potential to reach small farmers in developing countries. Surprisingly, the demand and take-up rates are low for weather index insurance (WII) products. One of the reasons hypothesised for the low demand and take-up of index-based insurance products is their inherent complexity, which makes it difficult for farmers to perceive the direct benefits. Hence, to encourage stronger participation, the project introduced an innovative WII product that was simple, transparent, flexible and affordable for smallholder farmers. In fact, the insurance product was a menu of very simple insurance options, each with a flat payment, but different triggers and for different coverage periods. This product was tested in three districts of Madhya Pradesh, India, during two consecutive summer agricultural seasons (known as kharif in India) in 2011 and 2012 among the farmers who were cultivating rained soya bean crop. .

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