Presented at UNDP-CIRM National Microinsurance Conference, New Delhi in December 2009. Mangesh was a panelist for the panel named "Issues and innovation: Crop insurance". The other panelists included Harini Kannan of Swiss Re, Gunaranjan - a former employee of BASIX, Mr. K N Rao of Agriculture insurance company. The facilitator was Dr. Siddharth Sinha.

1. Index based insurance
schemes: Way ahead
Mangesh Patankar, CIRM

2. Challenges in the current crop
insurance schemes
• Area yield –
– Lack of re-insurance
• Unsustainable loss ratio
• High administration costs
• Settlement time (Manual claim estimation)
• Weather index –
– Basis risk: Particularly for rainfall products
– Limited scale up opportunities: (Weather
infrastructure and data issues)
Need for subsidies

3. Composite
products
Innovations
Alternate
measuring
• Lower basis risk
Product • Data constrained geography Weather
• Modular product tickets!
Bundling
•Indirect sale
Process
•Awareness
Education
modules

4. Composite products:
• Combine area yield with weather index
– E.g Combine weather index with vegetation
index from remote sensing data: NDVI
(Normalized difference vegetative index)
• Portfolio insurance products
– E.g. ILRI product in North Kenya
• Providing agro-advisory services with
insurance
– E.g. BASIX, WRMS

5. Products in data constrained
geographies
• RFE products: Spatial rather than point based
measurement
• Very high transparency of the data
• Low accuracy – thus high basis risk
• E.g. Ethiopian project involving WB, WFP and FAO for
LEAP (Livelihoods – Early Assessment and Protection)

6. Modular products
• Weather tickets - Based on the self
assessment of risks: IFPRI and Nyala
Insurance Company
Sowing Sowing
Flowering
Harvesting
Flowering Individual
Weather Tickets
Harvesting

7. Comparative analysis

8. Area Yield
Costs incurred in administration
Weather index
Weather-NDVI
composite
NDVI
RFE
Transparency in settlements

9. Weather-NDVI
composite
RFE NDVI
Speed of settlements
Weather index
Area Yield
Accuracy

10. RFE
Weather-NDVI
composite
NDVI
Scalability
Area Yield
Weather index
Complexity of product

11. Process innovations
• Bundling weather insurance with
– Agri–inputs: WRMS-ICICI Lombard product
for Pioneer seeds
– Contract farming processes: Pepsico

12. THANK YOU…

13. NDVI

14. NDVI – Our experience
• Pilot product for 2 districts: Surguja
(Chhattisgarh) and Nizamabad (AP)
• Research on acceptability and accuracy of the
composite index product
• Demand side findings:
– Perception towards index
– Client education
– Expected accuracy
• Supply side findings:
– Data availability and time required for ground truthing
– Reinsurance
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