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Index based insurance schemes - Way ahead!

D
deccanexpress

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.

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Index based insurance schemes: Way ahead Mangesh Patankar, CIRM
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
Composite products Innovations Alternate measuring Lower basis risk Product Data constrained geography Weather Modular product tickets! Bundling Indirect sale Process Awareness Education modules
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
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)
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
Comparative analysis
Area Yield Costs incurred in administration Weather index Weather-NDVI composite NDVI RFE Transparency in settlements
Weather-NDVI composite RFE NDVI Speed of settlements Weather index Area Yield Accuracy
RFE Weather-NDVI composite NDVI Scalability Area Yield Weather index Complexity of product
Process innovations Bundling weather insurance with Agriinputs: WRMS-ICICI Lombard product for Pioneer seeds Contract farming processes: Pepsico
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NDVI
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 Back

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Index based insurance schemes - Way ahead!

  • 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
  • 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 Agriinputs: WRMS-ICICI Lombard product for Pioneer seeds Contract farming processes: Pepsico
  • 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 Back