Weather Based Crop Insurance in India

  • Clarke D
  • Mahul O
  • Rao K
 et al. 
  • 64

    Readers

    Mendeley users who have this article in their library.
  • N/A

    Citations

    Citations of this article.

Abstract

The weather index insurance market in India is the world's largest, having transitioned from small-scale and scattered pilots to a large-scale weather based crop insurance program covering more than 9 million farmers. This paper provides a critical overview of this market, including a review of indices used for insurance purposes and a description and analysis of common approaches to design and ratemaking. Products should be designed based on sound agronomic principles and further investments are needed both in quantifying the level of basis risk in existing products, and developing enhanced products with lower basis risk. In addition to pure weather indexed products, hybrid products that combine both area yield and weather indices seem promising, with the potential to combine the strengths of the individual indices. A portfolio approach to pricing products, such as that offered by Empirical Bayes Credibility Theory, can be significantly more efficient than the standalone pricing approaches typically employed in the Indian market. Legislation for index insurance products, including consumer protection legislation, should be further enhanced, for example by requiring disclosure of claim payments that each product would have made in the last ten years. The market structure for weather based crop insurance products could better reward long-term development of improved product designs through product standardization, longer term contracts, or separating the roles of product design and delivery.

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

There are no full text links

Authors

  • Daniel J Clarke

  • Olivier Mahul

  • Kolli N. Rao

  • Niraj Verma

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free