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Crop insurance for adaptation to climate change in India

Swain, Mamata (2014) Crop insurance for adaptation to climate change in India. Working papers (61). Asia Research Centre (ARC), The London School of Economics & Political Science, London, UK.

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Abstract

In India, agriculture is inherently a risky venture due to uncertainty in production and volatility in price, and more so in the context of increased climatic aberrations and globalisation. Therefore, there is a great need for crop insurance to provide economic support to farmers, stabilise farm income, induce farmers to invest in agriculture, reduce indebtedness and decrease the need for relief measures in the event of crop failure. This paper assesses the performance of the National Agricultural Insurance Scheme, NAIS (area based crop yield insurance) and the pilot Weather Based Crop Insurance Scheme, WBCIS (area based rainfall insurance) under implementation in the state of Odisha, the climate change hot spot of India. Analysing secondary time series data on performance of these two schemes and information gathered through focussed group discussion with insurance users, the paper concludes that WBCIS seems to perform better than NAIS because of higher coverage, larger percentage of farmers benefited, lower premium, faster and more frequent compensation payment and more transparency. But WBCIS covers only weather related risk and the sum assured and the compensation amount are lower. Therefore, instead of having two schemes, a hybrid product combining the advantages of both the schemes should be offered. To increase the penetration of insurance in rural areas, insurance companies may be asked to provide priority insurance services to farmers just like priority lending to agriculture sector. The public sector may address catastrophic risk and provide multi-peril insurance where subsidy requirement is high, but allow private sector to provide insurance products for less severe events and for individual independent idiosyncratic and localized risk. In the context of climate change with increasing agricultural risk, there is a need to redesign insurance products not merely as a risk transfer mechanism but as a potent device to reduce risk and crop loss by inducing desirable proactive and reactive responses in insurance users.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/asiaResearchCentre/_files/ARC...
Additional Information: © 2014 The Author
Divisions: Asia Centre
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
S Agriculture > S Agriculture (General)
Sets: Research centres and groups > Asia Research Centre
Date Deposited: 15 Aug 2014 15:36
Last Modified: 16 Mar 2019 00:04
Funders: South Asian Network for Development and Environmental Economics (SANDEE)
URI: http://eprints.lse.ac.uk/id/eprint/59031

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