Field visit and training in Tamil – Nadul (India)

Transcription

August 2012
Understanding Agricultural
Index Insurance
Field Visit and Training in Tamil-Nadu (INDIA)
August 2012
August 2012
Summary
Introduction ....................................................................................................................................................... 3
The organisers ................................................................................................................................................... 4
Destination of the field visit .............................................................................................................................. 5
Background to agriculture insurance in India ................................................................................................... 6
Highlights from the Study Visit .......................................................................................................................... 7
Highlights of 27 August 2012:Understanding Agricultural Index Insurance ................................................. 7
Highlights of 28 August 2012: Is Weather Index Insurance, really Insurance? ........................................... 10
Highlights of 29 August 2012: Thiruverkadu village, Nagapattinam district ............................................... 12
Highlights of 30 August 2012: District Central Cooperative Bank (DCCB) and Kil Anupampattu village,
Cuddalore district ........................................................................................................................................ 14
Highlights of 31 August 2012: Credit delivery system in India, piloting weather index insurance and
creating a microinsurance knowledge portal. ............................................................................................. 16
Main lessons learnt ......................................................................................................................................... 17
Appendix 1 - List of Participants and biographies ........................................................................................... 19
Appendix 2 - List of Speakers........................................................................................................................... 26
Appendix 3 - Participant Views........................................................................................................................ 31
August 2012
Introduction
With 22 million farms covered by a yield-based
index, 3 million by a weather-based index insurance
and 340.000 farms covered by an insurance
combining the two indices, India is probably today
the most innovative and experienced country in
agricultural index-based insurance in the world.
Given that agricultural sector contributes to 18
percent of GDP and employs 60 percent of the
population, the Government of India closely
monitors meteorological risks and plays a key role
in the financing of agriculture in general and
agricultural insurance in particular.
Climate risks, including rainfall, have a significant
impact on the yields of farmers whose farms have
an average size of 1.2 hectares, are rarely irrigated,
and poorly supplied with water and thus dependent
on the monsoon rains. While the first yield indices
were developed in 1979, the first meteorological
agricultural insurance indices were sold in 2003,
linked
to
agricultural
credit.
From August 26 to 31, the Grameen Crédit Agricole
Microfinance Foundation, in partnership with the
Centre for Insurance and Risk Management (CIRM)
organized a study tour on agricultural index-based
microinsurance in India, with the starting point of
the visit the city of Chennai, in the south of the
country.
The main objective of this trip was to learn and
analyse what has been done to date in India to
cover small holder farmers against the risk of crop
loss with index insurance. In addition to having
significant involvement from the government,
India has also experimented with various types of
indices and has extensive experience with private
and community programs as well.
The 23 participants that were eager to learn from
India’s long and varied experience came from four
continents and 12 countries (Azerbaijan, Benin,
France, Germany, Guatemala, Nigeria, Philippines,
Senegal, South Africa, Kenya, Togo and Uganda).
Participants also had diverse professional
backgrounds and included regulators, insurers,
managers of microfinance institutions, private
foundations, donors, and academia (See the
Appendix 2 and 3 for the complete list of
participants and speakers).
During the week, participants learned about the
benefits and issues associated with these types of
risk management tools. At the end of the stay,
everyone left with a clearer picture of the
conditions for success in their respective countries
for the implementation of these mechanisms. The
two-day field trip gave the participants the
opportunity to hear first-hand from Indian farmers
about their experience with index insurance.
The participants and organisers at
the Conference venue in Chennai
August 2012
The organisers
Grameen Crédit Agricole Microfinance Foundation encourages
the development of local microfinance institutions and of social
business enterprises in developing countries. The Foundation
supports its partners by offering suitable financing in the form of
loans, guarantees or equity investment, as well as technical
assistance. The main focus is on partners with a strong social mission mainly targeting women and rural
areas; essentially in Sub-Saharan Africa, the Middle East, North Africa, South Asia and Southeast Asia.
In line with its mission to contribute to the fight against poverty by facilitating rural populations to access
financial services, the Foundation has recently started exploring the sector of agricultural microinsurance.
The Foundation believes that protecting the poorest against life and natural hazards is an essential part of
microfinance and aim to include enterprises responding to this challenge amongst its investment partners.
In order to foster the emergence of such partnerships in the sector of agricultural insurance and to
complement its microfinance activities they are currently supporting research and pilot projects such as the
following two agricultural microinsurance initiatives:
• A research programme, in partnership with Pacifica, Astrium Spot Image and the Europlace
Institute of Finance Foundation, that aims to prepare index-linked crop insurance models for
developing countries.
• The Crop Insurance Sahel project: the Foundation is providing technical and financial assistance for
this crop microinsurance pilot scheme, directed by Planet Guarantee, in four West African countries
(Senegal, Mali, Burkina Faso and Benin). It will offer minimum protection for 60,000 small farmers
in these countries over a four-year period.
The Foundation is also active in the development of social performance indicators in the microinsurance
sector and is pursuing smaller-scale research projects with its sister organization FARM (Fondation pour
l’Agriculture et la Ruralité dans le Monde).
More information on: www.grameen-credit-agricole.com
The Centre for Insurance and Risk Management (CIRM) is a non-profit organization engaged in a variety of
action research initiatives with insurers, NGOs and regulators to design and
promote innovative insurance products and to improve knowledge on riskmitigating mechanisms. It is committed to stimulating greater market
outreach of risk management solutions among vulnerable households
through its active involvement in research and design in various
microinsurance interventions.
It has four major focus areas under microinsurance:
• Health
• Livestock
• Agriculture
• Catastrophe
It focuses on building and disseminating sectorial
knowledge and expertise through its:
• Market Making
• Capacity Building
• Policy Advocacy efforts
CIRM is well connected with the ILO Microinsurance Innovation Facility; have carried out several studies
and seminars on the topic of agricultural insurance and have good references for such activities. They are
the best placed organization to ensure that the visits include the major stakeholders in the sector and are
well planned. They are based in Chennai, the capital of Tamil Nadu.
More information on: www.cirm.in
August 2012
The organisers
Destination of the field visit
The destination proposed was the state of Tamil Nadu
which has a high penetration of agricultural insurance.
Agriculture is the most predominant sector of the
economy of Tamil Nadu. 70% of the state’s population is
engaged in agriculture and allied activities for their
livelihood.
The principal food crops are rice, maize, jowar (cholam),
bajra (cumbu), ragi, and pulses (Bengalgram, Redgram,
Greengram, Blackgram and Horsegram). The cash crops
include cotton, sugarcane, oilseeds, coffee, tea, rubber,
coconut, gingelly and chillies. The important
horticultural products are bananas and mangoes. Paddy
is grown in large excess because rice is the main staple
food of the state. The Central and Tamil Nadu State
Government are continuously taking efforts to make
Agriculture, which is a primary sector, a growth engine
for economic dvelopment of the State.1
1
http://en.wikipedia.org/wiki/Agriculture_in_Tamil_Nadu
August 2012
Etat du Tamil Nadu
Location in India:
South India
Area (Sq Km):
130 058
Population:
62 110 839
Density (per Sq. Km):
478
State Capital:
Chennai
Climate:
Tropical
Principal Language:
Tamil
Other Languages Spoken:
English, Hindi and Kannad
Pondicherry is the capital of the Union Territory
of Pondicherry and gathers over 700 thousand
inhabitants. Its cotton spinning mills foster an
intense harbour activity. In a part of the city,
French street names and buildings are still
reminding that Pondicherry was previously a
French colony.2
Background to agriculture insurance in India
Agriculture is the predominant source of livelihood in India and contributes to nearly 18 per cent of Indian
GDP, employing about 60 per cent of the labour force. Weather phenomenon like excess of precipitation is
a major yield risk for farmers as a majority of the agricultural land is not irrigated and the limited irrigated
areas suffer from inadequate and unreliable water.
The major instruments used by the government to protect farmers from agricultural variability include crop
yield insurance scheme, procurement of food grains at minimum support prices and calamity relief funds.
Problems exist with both the design and delivery of crop insurance schemes. Some of the critical problems
include moral hazard, adverse selection and basis risk, which is specific to index based insurance. These
problems could be overcome with rainfall insurance and a well-developed rainfall measurement
infrastructure.
Agricultural insurance in India has graduated from Comprehensive Crop Insurance Scheme (in 1985-98) to
yield index based National Agricultural Insurance Scheme (NAIS operational since 1999) and from NAIS to
Weather Index-Based Crop Insurance Scheme (WBCIS, pilots started in 2003-04) to modified National
Agricultural Insurance Scheme (mNAIS, pilots started in 2010-11).
Two pilots are currently being studied in order to replace the NAIS: the Weather Based Crop Insurance
Scheme (WBCIS) and the modified National Agricultural Insurance Scheme (mNAIS). The main difference is
that the WBCIS is based on a weather index and the mNAIS combines the area yield with a weather index.
For a detailed presentation of the agriculture insurance in India see the Appendix N°1
2
http://en.wikipedia.org/wiki/Pondicherry_(city)
August 2012
Highlights from the Study Visit
Highlights of 27 August 2012:Understanding Agricultural Index Insurance
Sources: blog.cirm.in
The first day of the workshop was flagged off with a presentation by CIRM on the context of agricultural
insurance in India. Attention was devoted to ways which may improve the “client value” by addressing the
three key challenges: reducing basis risk, introducing value added services and creating simple products.
There are two types of basis risk: one is geographical, caused by the distance from the weather station to
the insured land, the second is linked to the contract design, in case the index does not follow properly the
effective yield or in case the contract only covers rainfall for example, and no other risks that can affect the
crop. Basis risk affects the client’s perception of the product and can be very detrimental to the product’s
survival in case the farmers experience a loss that is not covered by the insurer. Incomplete data is also a
risk to the insurer as it will lead to an extra price load from the re-insurer. Increasing and improving data
can be costly but can lead to the reduction of basis risk and the decrease the price of reinsurance for
example by increasing the number of weather stations or introducing the use of remote sensing for
example.
An example of added services was the provision of weather-related forecast information to the farmer via
SMS which was included in the insurance package. With the increasing mobile access in Africa, this was
proposed as an interesting solution to adopt for some participating
countries.
Ashutosh Shekhar, Agricultural Analyst at
CIRM
Innovative weather insurance projects undertaken by CIRM include
simple and flexible small size contracts to allow customized
insurance cover for small policy holders. That way, farmers can
insure a part of their risk, by selecting specific crop phase and the
cover limit they need, and hence pay smaller premiums in the
bargain. With a low ability and willingness to pay in countries
launching weather insurance, such contracts could be very
valuable.
This was followed by Mr. Kolli N. Rao’s who is part of the Agriculture Insurance Company of India Ltd (AIC).
He stressed the need for index-based crop insurance in India, given the over-reliance of agriculture on the
vagaries of the monsoon and non-availability of past records on yield. An example of how payouts are
calculated under the yield-based National Agriculture Insurance Scheme (NAIS) was shared.
• First, based on yield variability at the district level over the
last ten years (650 districts in India), a coefficient of
variation is calculated, according to which areas are
classified as high, medium and low risk.
• Second, a simple average of previous seven years yield data
was collected and verified by the State government, and
taken as the guaranteed yield, compared with current year’s
actual yield to calculate the shortfall. This feeds into the
claim pay-out calculations.
Mr. Kolli N. Rao is Chief Risk Officer, and is
Head of the 'Product Development' and
As NAIS was progressing, attempts were made to develop a system
'Reinsurance'
within Agriculture Insurance
whereby claims could be settled quicker and with lower
Company of India Ltd. (AIC)
operational costs (i.e. the expensive and long crop cutting
experiments at the end of the harvest to determine the average yields). As a consequence, weather
August 2012
insurance with alternative index parameters (rainfall, consecutive dry days, temperature, wind speed,
humidity) was launched in 2003 as a pilot by ICICI Lombard and by AIC in 2004 known as the Weather index
Based Crop Insurance Scheme (WBCIS). This pilot went on till 2007, with no subsidies from the government
during this four-year period.
In order to scale up the outreach of the WBCIS, in 2007, the government provided premium subsidies. The
sector also developed rapidly due to the very dense prevalence of agricultural loans in in India. Under NAIS,
the government subsidized the claims (which in most years exceeded the total premium collected). Under
the WBCIS the government subsidized the premium.
Currently, three distribution channels are being used by AIC for distributing weather insurance contracts;
Rural Financial Institutions (RFIs) – commercial banks, regional rural banks and cooperative societies. Apart
from this, non-banking institutions such as insurance intermediaries, micro insurance agents and postal
departments are also used, as these have extensive grass root networks.
While Mr. Rao elucidated on several dimensions of weather-based insurance, one aspect became the topic
for much deliberation. Mr. Alhaj Lubega, CEO of Insurance Regulatory Authority, Uganda and Chairman of
the East African Insurance Supervisors Associations (EAISA) enquired “Considering the case of inadequate
weather stations in developing countries, would Mr Rao recommend them to begin with a yield based
insurance over the weather based insurance? Also, if the latter was chosen, what would be the first steps in
setting it up a sustainable weather insurance market?”
Mr Rao responded “If historical yield data at the micro-level is
available then area yield based insurance can be taken up. In
developing nations, this information is rarely available, and
hence weather-based insurance is the logical option. For a
weather-based insurance to effectively integrate village level
data, India needs 8000 weather stations and 32,000 rain
gauges. Moreover, the annual cost of maintaining these
stations, is approximately 25% of installation costs which can
vary between 1000 – 40000 USD. At present, we have less
than 25% of this infrastructure. To improve the outreach of
our insurance products we need to finance and maintain the
mechanisms that collect and update crop production and
weather data.”
Mr. Alhaj Lubega, CEO of
Insurance Regulatory Authority, Uganda and
Chairman of the East African Insurance
Supervisors Associations being greeted by
the farmers in the Kil Anupampattu village
AIC is currently trying to reach the non-borrowing
farmers by piloting a savings-linked insurance product
as well as a product which pays back 25% of the
premium in case weather index does not trigger
payout but community leaders enforce that there is
crop loss.
For the participants to understand the government’s
commitment to agricultural insurance he stated that
25 billion USD is give in subsidies for fertilizers per year
compared to 2 billion USD in subsidies for crop
insurance.
Automated Weather-Station
Left: anemometer, thermometer,
hygrometer and a solar panel for
data transmission. Right: rain
gauge
Mr. Rao highlighted the important role of private players in providing village level data. However, the data
integrity needs to be controlled through reliable regulation, to guarantee data collection according to
standards and specifications prescribed by the government, thus ensuring a transparent and reliable
market growth.
August 2012
In the afternoon, M. Azad Mishra from the HDFC ERGO
presented different ways in which weather index-based
insurance products may be priced. The presentation begun
by listing the perils insurance can cover (deficit/excess of
rainfall, extreme fluctuations of temperature, high relative
humidity, high/low wind speed, low solar energy / sunshine
hours or a combination of them).
For those products, the risk period may be fixed or floating,
and the payouts can be fixed or linked to the national. Then
M. Azad Mishra from the HDFC ERGO
the pricing may follow one of those models:
Burn analysis (calculation on the past actual claims of the premium leading to a claims/premium
equilibirum)
Arbitrage pricing model
Normal approximation
Monte Carlo Simulation (simulation of the data a great number of times)
In most cases, the payout is a fixed, staggering payout. For example, a low-rainfall product pays a certain
amount of money per millimeter below a threshold. A maximum payout is defined, paid below the
threshold named “exit”, see the figure below.
Payout of a low-rainfall product
HDFC ERGO implements the Weather index-Based Insurance Scheme (WBCIS) since 2010 and offers also
the modified National Agricultural Insurance Scheme (mNAIS) in 13 states. They have covered more than
260 thousand farmers and around 400 thousand hectares till
2012. During the 2011-2012 campaign, 20% of the purchasers
were non-loanee farmers. This success stems from marketing
efforts, among which interactive meetings in villages or a van
touring to get people aware of insurance and of their offer.
To conclude this first day, M. K. Gopinath from the IFFCO TOKIO
General Insurance (ITGI), enlightened us on the strategies
employed for sustainable weather insurance distribution. ITGI is
the blend of IFFCO, the world’s largest fertilizer manufacturer in
M. K. Gopinath from the IFFCO TOKIO
General Insurance (ITGI)
cooperative sector, and of Tokio Marine Nichido, Japan’s oldest
and largest general insurance company. He started with a quick
overview of the evolution of agriculture insurance in India.
August 2012
M. K. Gopinath presented the “Blue ocean strategy” by
Kim and Mauborgne, which consists in going from the
market to the minimal purchasers, to the people aware
of the product but under-price constraints, to the rural
population who never used the product. This is the
way to profitable growth (see the figure on the right).
An impediment to this strategy is the difficulty to reach
the rural population. The customers are less aware of
the insurance benefits, insurance itself is seen as a bad
omen. For them, there are too many formalities and
the settlement time is too long. On the other hand, the
insurer has high claims ratios, high moral hazard and it
is costly for him to get to the rural population – not to
speak of the fraud and robberies phenomenon. All
these points result in low penetration.
The going rural-blue ocean strategy
ITGI’s solution is first to use IFFCO’s network, and to
by Kim and Mauborgne
complement it with agents from cooperative societies.
They also pay claims via cheque distribution in public functions. These channels are trustworthy
intermediaries and can help to client education.
Highlights of 28 August 2012: Is Weather Index Insurance, really Insurance?
The day started with two interesting presentations. While the first focused on the importance of
information (data) for weather risk and natural catastrophe management, the second delved into product
design innovations.
August 2012
Mr. V.S. Prakash from the Karnataka State Natural Disaster
Monitoring Centre (KSNDMC) began by stating that the approach
to disaster management has shifted from rescue/relief post
disaster, to disaster risk reduction by using Information
Communication Technology (ICTs). According to Mr. Prakash the
first step in disaster management is proper measurement of
weather parameters. “If it cannot be measured properly, it
cannot be managed properly”.
V.S. PRAKASH is the Director of the
He presented various tools used to capture and interpreting
Karnataka State Natural Disasters
weather data and to disseminate the information. One specific
Monitoring Centre, an autonomous body
example he used to illustrate how they addressed the challenge
affiliated with the Department of Science
was the use of solar powered telemeter rain gauges in areas
& Technology, Government of Karnataka,
where the electricity was unreliable. The data collected from
India
these rain gauges is transmitted every fifteen minutes using
GPRS, and feeds into a GIS map, which shows differential rain levels at villages that are 2.5 kms away from
each other. This is made possible by using a geo-statistical technique to interpolate the value of the rainfall
at an unobserved location from observations of its value at nearby locations (kriging). In this process any
localized error or fraud shows up as an anomaly allowing for corrective measures.
Mr. Navin Sharma from ICICI Lombard outlined the journey of his
organization from being the first in undertaking a pilot project with
230 farmers covering two crops in 2003, to being a company
providing services to over ten million farmers covering more than
45 crops across multiple states. Once the premium subsidy was
achieved for the WBCIS, the sector achieved phenomenal growth,
and there are currently six private insurers offering weather
insurance contracts in India. What caught the attention of the
participants was that ICICI Lombard has introduced this indexNavin Sharma is the Vice President –
based scheme to non-farm sectors dependent on the weather such
Health & Weather, ICICI Lombard GIC
as lac (a scarlet resinous secretion of a number of species of insects
Limited
used in dye production), seri-culture, salt pans and brick kilns.
Discussions also focused on products offered to corporate clients such as Pepsico (weather insurance for
potato growers), Gujarat Heavy Chemicals Ltd (covers losses incurred in salt production) and Air India
(covers losses incurred on delay in flights due to heavy fog).
Under weather insurance, a payout can be made at various stages as harvest losses are expected. For
example, payouts can be made for deficit rainfall in the sowing phase allowing the farmer to buy
replacement seeds or rent out water pumps and manage to avoid actual full losses. This is where weather
insurance differs from classical insurance, where payouts are made against actual experienced losses. It is
relevant here to point out the difference between a weather ‘indexed’ contract and a traditional insurance
contract – as in the latter, indemnities are paid only after actual damages occur and not against proxies. A
weather index insurance contract can be considered as a weather derivative or a weather insurance
contract. While the difference between the two might be important from regulatory and legal viewpoints,
from an economic perspective, both instruments share the common feature of being triggered by an
underlying weather index.
The decision to keep weather contracts in the form of insurance, or treat it as a derivative is the
prerogative of the nation under consideration.
August 2012
In the afternoon, M. Natu Macwana from the Coastal Salinity
Prevention Cell (CSPC) explained the stakeholder engagement in
product design and distribution. He underlined the importance
of weather-risks managing tools such as insurance. As it can be
seen on the figure below, weather risks are non-controllable
production risks. More than 90% of crop losses result from
improper rainfall. For example, the years 1999 to 2002 were a
continuous drought period, followed by five years of heavy
rainfall, from 2003 to 2007, which makes risk management a
difficult exercise.
M. Natu Macwana from the Coastal
Salinity Prevention Cell (CSPC)
Albeit insurance products be important tools,
they are totally useless if constructed without farmer’s involvement
For example in 2010, almost no
claims were paid. As a consequence,
a half of the insured quitted the
scheme. This is because the triggers
weren’t at a coherent level. The
CSPC met agri scientists, farmer
groups and NGOs in order to fix the
outstanding problems, and it
improved the take up. The
modifications affected not only the
trigger levels, but also the length of
the periods insured and the
premium level. The farmers trusted
the product, a product they helped
to build, a product which responded
better to their needs.
A slide from M. Natu Macwana’s presentation, distinguishing controllable and non-controllable risks
To conclude, M. Natu Macwana promoted the “Four Ps”: Process, Product, Partners and Promotion, all
linked by a constant: open and participatory dialogue.
From the Field Visit: Engaging with community based
organisations, cooperative banks and farmers
Highlights of 29 August 2012: Thiruverkadu village, Nagapattinam district
Nagapattinam district, located in the Cauvery delta, is a major rice producer. The region is prone to many
types of natural disasters and has experienced flooding of the river Cauvery, the 2004 Tsunami and big
cyclones. Moreover, farmers in the region (mostly marginal and small landholdings) rely on Cauvery water
for crop production.
During the first day of the field visit, the participants interacted with members of Kazhi Kadaimadai
Farmers Federation (KKFF), a Community Based Organisation (CBO) who work with a group of farmers who
purchased NAIS (yield index based insurance product) and Varsha Bima (weather index based insurance
product), offered by AIC.
August 2012
KKFF started as a CBO to rehabilitate tsunami affected people and later
developed into a service model, providing agro-advisory services, seed
production, warehousing facilities and crop insurance services. It is through
this model that KKFF got involved in rendering services related to agricultural
insurance offered by AIC. Farmers become members of KKFF and can purchase
the insurance services upon payment on a nominal annual membership fee
(approximately 3 USD per acre of land).
The challenges that KKFF encountered in providing crop insurance were:
low client awareness leading to non-renewal, non-availability of bank
accounts and/or relevant documents
lack of initiative among banks and delays in claim settlement
A bag of rice produced by the
farmers in Nagapattinam
Over the years, KKFF developed strategies to overcome these difficulties,
which include, awareness raising among farmers and sensitizing banks on the
importance of insurance provision to small and marginal farmers.
Information provided by KKFF was complemented by interaction with farmers,
who had taken-up products, underwritten by AIC. Discussions with the
farmers revealed that they were unaware of agricultural insurance before
being affected by the Tsunami. While several farmers were insured by default
when they opened bank accounts for agricultural loans (as the statesubsidized agriculture credit is bundled with agriculture insurance) they were
ignorant of it.
Deliberations with the farmers revealed that they had good product
knowledge. They explained that while in the case of NAIS, the insurance was
bundled with the loans taken by the farmers and was subsidized by the
government, Varsha Bima, which was introduced in the district on a pilot basis
was not subsidized by the government. Farmers also expressed their
discontentment on both the products. In the case of Varsha Bima, it was
related to the claim payment procedure. One farmer said, “The product
(WBCIS) was designed to pay-out upon 25 CDDs (Continuous Dry Days). I
experienced 23 CDDs and a very light shower in the last two days, but I did not
receive any claim”.
The farmers of KKFF sharing
their experiences with
agriculture insurance
In the case of NAIS, farmers felt that the payouts
were very slow, and often it took almost six months
to receive the payouts. Farmers also commented
that one of the major problems of insurance is the
index, because it is based on a large region and the
vulnerability of a particular village is not taken into
consideration. They felt that crop cutting
experiments must be conducted at a village level.
Challenges the mNAIS aims to address.
Participants asking questions to the farmers
Another problem is continued low awareness among
farmers, despite proactive efforts taken by
agriculture departments as well as the insurance
company.
Before the end of the day, the group also visited an automated weather station operated and managed by
one of the villages.
August 2012
The farmers and the study visit group
Automated Weather Station
Highlights of 30 August 2012: District Central Cooperative Bank (DCCB) and
Kil Anupampattu village, Cuddalore district
The second day of the field visit began at the head
office of the District Central Cooperative Bank
(DCCB) which has 100 000 members, where the
participants learnt about the socio-economic and
demographic profile of farmers, cropping patterns
in the district, the role played by the bank in
agricultural financing and the distribution of the
modified National Agricultural Insurance Scheme
(mNAIS). There are 2 283 000 people in Cuddalore
(1.1 million men and 1.13 million women) and the
total cultivated land in the district is 256 000
hectares of which paddy is 123 000 ha; sugar cane
37 000 ha; groundnut 13 000 ha.
Farmers are categorized as follows:
• 2.5 hectares < marginal farmers
• 5 ha < small farmers
• 5 ha > large farmers
Up until 2012 the DCCB has lent more than INR
2000 million (36 million USD) to the farmers of the
district for carrying out agriculture-related
activities. Loans are provided either in cash (given
directly to the farmer for meeting cultivation
expenses) or kind (credit in the form of agricultural
inputs, hybrid seeds etc). Loans are also based on
the cropping season – Kharif (April-December the
summer crop) and Rabi (January-March the winter
crop), as well as the variety of crops grown in each
season. Loans are provided only if the farmer is a
member of the bank and has possession of all
relevant land-holding documents.
The dates for repayment depend on the harvest
schedule of the crop. Farmers are exempt from
payment of interest if loans are repaid on time but
an interest rate of 8% is applicable in case of any
delay. During the growing season the interest rate
of 7% is applied to the loan which is subsided by the
Central government (4%) and the State government
(3%).
Keeping in mind the vulnerability of the farmer, the
cooperative bank has introduced the Agricultural
Jewel Loan, whereby farmers can take a loan for
meeting their personal expenses, in case of failure
of the monsoons. The jewelry acts as collateral,
with the rate of interest being 7% (which is close to
half of what other banks charge). Upon hearing this
one of the participants was curious to know what
happens when the farmer is unable to repay the
agricultural loan and has also taken a Jewel loan.
“How does he survive with this repayment burden?”
The DDCB’s assistant general manager replied
“Insurance comes to his rescue. Also, if the first loan
is not repaid, the farmer is not eligible for another
loan. This is an incentive for repayment.”
August 2012
The DCCB also provides credit for other activities such as poultry
and fisheries as an alternate livelihood opportunity to help coping
when crops fail. Warehouse facilities are also provided, whereby
farmers can store their produce in case of lack of demand, take a
loan to on 75% of the value of the produce and sell it when there is
demand and prices rise. The loan can then be repaid after sale of
this produce. The agricultural loan and warehouse receipt loan are
independent, and the farmer is eligible for this loan even if he has
defaulted on the first. Moreover, crops stored are insured through
Primary Agricultural Cooperative Society (PACS). The Banks stated
District Central Cooperative Bank (DCCB)
with the AIC representative
that they have a 90% recovery rate for the crop loans and 89%
recovery for their entire portfolio. Since insurance was introduced,
nearly 50% of their outstanding loans have been covered by insurance.
The farmers who had availed loans of the DCCB chose mNAIS as the preferred product, “As it has managed
to bring about 90% accuracy at the village level by increasing the
number of crop cutting experiments. Also, there is faster claim
settlement, at each crop stage, from sowing to harvesting.”
The second half of the day was spent on a small farm in Kil
Anupampattu village, owned by Mr. Ravindran, also the
president of the farmers’ federation in the region. An elderly
farmer spoke to the participants about the difficulties faced by
farmers in the region due to floods and droughts. Their situation
is also worsened by the low Minimum Support Price (MSP) – a
price risk social protection tool used by the government, where a
minimum price for specific crop is defined at which the state
purchases the crop from the farmer.
Farmers of the Kil Anupampattu village
sharing their experiences with agriculture
insurance with the visiting group
Farmers stated that mNAIS has a good approach as it provides interim claim settlements after each crop
stage and is based on yield and crop cutting experiments, rather than just weather data. On the latter is
problematic as, “the number of weather stations in our district is low and weather calamities depend on the
announcements by the government. We feel that mNAIS is more transparent in this sense”. They also feel
that the payouts have are larger.
Group picture with the farmers from the Kil Anupampattu village
August 2012
Highlights of 31 August 2012: Credit delivery system in India, piloting
weather index insurance and creating a microinsurance knowledge portal.
India has the fourth densest financial network in the world and over 80% of the agriculture insurance in
India is distributed leveraging the strong Regional Rural Bank (RRB) network.
The National Bank for Agriculture and Rural Development (NABARD) is the apex agency with the national
mandate to facilitate the credit to promote and develop agriculture. Mr. Sundar, General Manager of
NABARD branch in Chennai provided a holistic picture of the formal credit delivery system in the country
stating that while NABARD does not play a regulatory role, it is engaged with credit refinancing,
institutional development and innovative initiatives to achieve its mission. Two issues are of particular
importance:
First, the two important models of subsidies provided by NABARD to encourage banking
institutions to serve farmers-namely, interest and capital subsidies. The interest rate for lending to
agriculture currently is capped at 7% and the banks that lend at this rate get an interest subsidy of
2% from the government. Therefore the farmer receives the credit effectively at 5%. The interest
subsidy of 2% is provided to the banks by NABARD. On the other hand, capital subsidy is provided
at a comparatively smaller scale to certain agri-allied sectors such as dairy and ranges from 25-33%
of the total loan value (depending on the vulnerability of the borrower) to encourage households
engage in such businesses.
Second, the various players in the banking system. While RRBs operate at the district level and can
cater for their financial needs, the Cooperative Banks serve village level Primary Cooperatives and
often need a financial leg-up from NABARD to meet the credit needs of their members. NABARD
assists these institutions to meet these credit needs.
Mr. Sundar identified several challenges in ensuring that
insurance is a viable proposition for the farmer. NABARD is
focusing on the small farmer and aggregation of farmers to
enhance efficiency – producers’ organisations are being formed
so that farmers have a larger share of the end customer’s rupee
and closer access to the markets. He concluded by saying that
the focus is “not on standard banking but development banking”
and stating that the government’s mission is that by 2015 all
families should have a savings account.
R Sundar is currently the General
Manager, National Bank for Agriculture
In the process of kick-starting the weather index insurance
and Rural Development (NABARD) at the
market in a country, Mr. Shekhar of CIRM pointed out the key
Tamil Nadu Regional Office, Chennai
steps:
The first step is a Needs Assessment which includes the identification of the weather-crop
correlation data including irrigation needs, crop cycle and extent of historical weather related
losses. As obtaining data in developing countries in Asia and Africa is difficult, using remote sensing
technology may be a good option.
With regards to piloting, selection of area is critical – an area that is vulnerable to weather risks and
not too far (about 15-20 kms) from a weather station and having good infrastructure that aids the
design and distribution.
Lastly, collaborating with a strong reinsurer is crucial.
He also outlined the need for innovative hybrid products, such as mNAIS, which is an amalgam of the area
yield and weather insurance index that has different payout rates across different stages of the crop cycle.
August 2012
Ms. Rupalee Ruchismita of CIRM, outlined the need for
facilitative infrastructure with special focus on regulatory
mechanisms governing insurance and the need for a National
Databank. Broadly, there are two regulations in India which
focus on rural and microinsurance business:
1. Rural & social sector compulsory obligations under
which all insurance companies are expected to
undertake a certain percentage of their business from
rural areas (increasing up to 8% for general insurance
companies).
Rupalee Ruchismita is the founding head
of CIRM
2. As per the Microinsurance Act (2005), the company is
allowed special leniency while designing and
distributing products registered with IRDA as microinsurance. Even though the Micro Insurance Act
was supposed to be facilitative, the data as seen on Microinsurance Map shows how the premium
collected by insurance companies from registered ‘microinsurance’ products is nominal, despite the
growth in the compulsory ‘rural’ portfolios. The good news is that, partly driven by the large state
premium subsidies for health and agriculture insurance products, many private insurers are
exceeding their rural portfolio targets.
When Ms. Ruchismita presented the Microinsurance Map (MIM) databank initiative which is a publicly
available, free-of cost database presenting a spatial mapping of best practices and scale of microinsurance
practices in the country. It seeks to deliver three outputs (a) risk data that will aid in the development of
actuarially priced products; (b) synthesize market information on products and delivery processes and (c)
create premium calculators to generate indicative pricing of products. Any country can take this framework
and can start mapping the insurance business of its insurers and distributors like MFIs, type of businesses
undertaken, products created etc, which aids in comparison of agricultural portfolios to kick start the
microinsurance sector in developing countries.
Main lessons learnt
Martine Dahoun being greeted by the
farmers in the Kil Anupampattu village
During the week, participants learned about the benefits and
issues associated with these types of risk management tools. At the
end of the stay, everyone left with a clearer picture of the
conditions for success in their respective countries for the
implementation of these mechanisms. As expressed by Martine
Dahoun, Head of Regulation at the Insurance Department of the
Ministry of Finance in Benin, “As regulators, we can’t just wait for
the products to appear. The insurance industry is constantly
changing and we must adapt to this reality. We must be part of this
movement and encourage the creation of new products.”
Another important lesson is that the value of products can be enhanced by adding services to the
insurance. For example, insurers can offer weather-related forecast information to farmers via SMS as part
of the insurance package. With the increasing mobile access in Africa, this was proposed as an interesting
solution to adopt for some participating countries.
The problem of reaching scale was partially solved in India by making insurance mandatory for agricultural
loans. Although in reality this is only applied to 22% of loans, it has helped to significantly increase the
volume of insurance policies. In addition, the federal government and the states subsidize between 50 and
August 2012
70% of premiums and require private insurance companies to achieve a defined percentage of their
turnover in rural areas. Whether all countries can afford to, or should put in place such subsidies and
mandate services from the private sector is a subject ripe for lively debate.
The design of an insurance product based on weather data is a complex exercise requiring close
collaboration with the government and its agencies. The coupling with other interventions such as the
provision of credit or farm inputs facilitates distribution at the village level.
Oscar Chamale, of the insurance company Aseguradora Rural
from Guatemala was impressed by the close working relationship
between the Farmers’ organizations and their insurer, ”I was
surprised by the involvement of the farmer organization in the
management of the product and they were even responsible for
the claims process. It’s very much integrated with their other
activities and hence becomes a part of the value chain. In
Guatemala, I have not yet seen any farmer organization take on
this role.” In Tamil Nadu, Farmers’ organization helps its
members to fill in the subscription forms and works with the
insurance company to accelerate the payout process and to
refine index.
Momath Ndao, Controller of Insurance Commissioner in
Senegal engages in lively classroom debates
Oscar Chamale of the insurance company
Aseguradora Rural from Guatemala
visiting a weather station
The two-day field trip gave the participants the
opportunity to hear first-hand information from
Indian farmers about their experience with index
insurance. Momath Ndao, Controller of Insurance
Commissioner in Senegal, summarizes the
encounters: “The farmers are the key actors at
every stage of delivering agricultural insurance and
need to be involved at each step. We need to listen
to the farmers as they are always smarter than us.
They know what they want and what is good for
them, just like the Senegalese farmers.”
August 2012
Appendix 1 - List of Participants and biographies
Georges A. Abbey
Georges Abbey is a lecturer of Farm Production Economics, Agricultural
Marketing and Agribusiness, Agricultural Financial Management and
Environmental Economics at the major public University of Togo – University of
Lome.
He worked on several research teams sponsored by regional and international
institutions such as ICRAF (International Center for Research in Agroforestry),
SADAOC (Sustainable Food Security in Central West Africa) Foundation,
International Institute for Tropical Agriculture (IITA), CORAF/WECARD (West and
Central African council for agricultural research and development) and
UNU/INRA (United Nations University Institute for Natural Resources in Africa).
Currently he serves as a consultant to the World Bank Group and assists the coordinator of the GIIF (Global
Index Insurance Facility) Regulatory and Policy Capacity Building Window in Africa in the monitoring of the
development and implementation of GIIF pilot projects.
Mr. Abbey holds a Ph.D. in Agricultural Economics, with a minor in Agricultural Finance.
Adébayo Pacôme Bonou
Adébayo Pacôme Bonou is the Head of AMAB Production Service (Agricultural
Mutual Insurance of Benin) - a mutual insurance company specializing in
coverage of insurance risks within agriculture and livestock. Previously he worked
as the Head of the Federal Agency of Insurance at Benin African Life.
Mr. Bonou holds Master of Science and Technology of Insurance and a Bachelor
of Science in Mathematics.
Oscar Chamale
Oscar Chamale, a Guatemalan national, is the Business Director of Aseguradora
Rural (Banrural Financial Group S.A). Oscar has more than 10 years experience in
insurance sales and marketing, with focus in personal insurance, market study
and in the design and launch of new products. He holds a bachelor degree in
Business Administration and a post-graduation certificate in Marketing.
August 2012
Chris Cherry
Chris is a qualified actuary currently lecturing full-time at the University of the
Witwatersrand in South Africa. Upon completion of his actuarial exams in 2009,
he worked for Quindiem Consulting in their non-life insurance team for two
years. In addition to lecturing, Chris is also currently studying theology through
the University of South Africa (UNISA). Chris' interest in microinsurance is due to
its great potential to improve the lives of so many individuals. While lecturing,
Chris intends to complete his masters by researching a microinsurance related
topic (potentially index-based insurance).
Sessimè Martine Dahoun
Sessimè Martine Dahoun is the Head of Regulation and Licensing Department of
the Insurance Department in the Ministry of Finance in Benin. She is an Insurance
Administrator - Economist, Commissioner Controller, graduate of the
International Institute of Public Administration in Paris & International Institute
for Insurance of Yaounde.
Constance Collin
Constance Collin is a French student in Statistics and Finance, registered both at
Ensai (engineering school of statistics) and at the University of Rennes. Currently
establishing the price of an index-based crop-yield insurance, Constance will soon
begin a PhD on index-based agricultural micro-insurances, in partnership with
Pacifica (a French insurance company) and the Grameen Credit Agricole
Foundation.
Mouhamadou M. Fall
Mr Fall is a water and forestry engineer, as well as an engineer in agro-economics
and holds an MBA in company management. For ten years he worked as a
national expert for the Senegalese government managing projects financed by
the FAO, USAID, IFAD, World Bank and West African Development Bank.
Thereafter he joined the private sector. First as a permanent member of the
direction committee and development coordinator of the Senegalese mutual for
agricultural insurance of the SONAM Group (National company of mutual
insurances). Thereafter he joined the FAIB as their director, the main executive
agency of the African Development Foundation (the American congress' public
foundation for development in Africa).
In 2005 he joined the Senegalese agency for rural electrification and became their director of private sector
projects. Since 2008 he is the deputy director of CNAAS – The national agriculture insurance company of
Senegal.
August 2012
Mr. Ayoola Paul Fatona
Mr. Fatona Ayoola Paul is a member of the project team set up by the Nigerian
Agricultural Insurance Corporation to explore the possibility of introducing
Weather Index Insurance Contracts into the Nigerian Agricultural Insurance
Market. He also served as a member of the committee set up by the Federal
Ministry of Agricultural and Rural Development to review the Agricultural policy of
Nigeria in 2012.
Mr. Ayoola Paul has over twenty years experience in underwriting Agricultural risks
in Nigeria with the Nigerian Agricultural Insurance Corporation. He has also worked
in various capacities in the operations (technical) division of the corporation.
He has the privilege of working with the World Bank team during the recent pre-feasibility study conducted
on the establishment of Weather Index Insurance in Nigeria by the World Bank.
Mr. Fatona Ayoola Paul is professionally qualified in the field of Insurance, Accounting and Economics and
holds a Masters Degree in Financial Management.
Vusala Garayeva
Mrs. Vusala Garayeva currently is a network coordinator in Azerbaijan Microfinance Association (AMFA) and is responsible for coordinating AMFA projects and
services. She is also responsible for organization of major AMFA events like Biennual Conference, Study Tour and provision of coaching to junior programme
staff in executing of small scale projects. She has nearly 10 years experience with
international Development Organizations. Mrs. Garayeva holds master degree
from Azerbaijan University of Foreign Languages.
Philippe Guichandut
Philippe Guichandut is the Head of Development and Technical Assistance at
Grameen Crédit Agricole Microfinance Foundation.
From 1986 to 2004, Philippe Guichandut worked for various French development
NGOs (France Volontaire, Inter-Aide, Enfants et Développement - Save the
Children France, CCFD-Terre Solidaire). He spent six of those 17 years in the field:
in Rwanda, India and the Philippines.
He was in charge of setting up and monitoring development and microfinance
projects. He became the first Executive Director of the European Microfinance
Network when it was created in 2004.
Mr. Guichandut has been teaching development and microfinance project management for more than 10
years in France and other European countries. He has a Master's degree in Urban Social Development from
Université d'Evry and an MBA from the European University of San Francisco.
August 2012
Tiburce Kouton
Tiburce Kouton is an agricultural engineer specialised in Economics and Rural
Sociology. He is the Director General of Agricultural Mutual Insurance of Benin
(AMAB) having previously worked as the Permanent Secretary of the Federation of
Unions of Producers of Benin (Benin-FUPRO).
Fabrice Larue
Fabrice Larue is project manager on the topics of agricultural financing and
management of agricultural value chains at the Foundation for World Agriculture
and Rurality (FARM) based in Paris. Graduate of HEC Montreal, Mr. Larue has spent
some years in Mali and Senegal strengthening producers organizations and
marketing services, after having worked as financial adviser for a Canadian bank.
At FARM, he is responsible for advocating the importance agricultural financing for
agricultural development in West Africa and focuses on improving the links
between producer’s organisations and local financial institutions. He also supports
producers organizations develop economic services to their members and become
economic actors in the agricultural value chains.
Bruno Lepoivre
Bruno Lepoivre is the Vice-director, Market of agriculture at the Crédit Agricole
Assurance Pacifica - the non-life insurance branch of Credit Agricole Group. He is
responsible for research, marketing and technical sectors and for 9 years, he has
enabled Pacifica to develop a wide range of traditional insurance solutions for
farmers, and to explore parametric insurance solutions. Mr. Lepoivre holds a MBA
in Agro-Economics.
Jimmy Loro
Jimmy Loro is a Senior Adviser - Lead Expert at Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) GmbH. He specialises in GIZ Remote SensingBased Information and Insurance for Crops in Emerging Economies (RIICE).
Jimmy has more than ten years of demonstrated success in managing versatile and
challenging programs funded by the GIZ, EU, AusAID, UN, and the Philippine
government. In 2010, Jimmy managed the development and pilot testing of the
first Area Based Yield Index Insurance (ARBY) for irrigated rice in Leyte Province,
Philippines.
He is currently overseeing the enhanced ARBY which will use remote sensing to determine rice yield as well
as provide vital information to policy makers. Jimmy is married with two kids and is based in Manila,
Philippines.
August 2012
Alhaj Kaddunabbi Ibrahim Lubega
Alhaj Kaddunabbi Ibrahim Lubega is the Chief Executive Officer of Insurance
Regulatory Authority of Uganda and Chairman of the East African Insurance
Supervisors Association (EAISA).
Alhaj Kaddunabbi has over two decade’s hands-on experience in insurance
operations, regulation and supervision. He served as President of Insurance
Institute of Uganda, Executive Member of the Parliamentary Union of the
Organization of the Islamic Conference, Vice Chair and Member of three
distinguished University Councils in Uganda.
He was also a Member of Parliament of Uganda for 10 years, where he chaired the Parliamentary Committee
on the National Economy and Board of Trustees of the Parliamentary Pension Scheme.
He holds a Masters in Economic Policy and Planning and a Bachelor of Science in Economics from Makerere
University, Uganda. In addition, he is a Senior Associate and Certified Insurance Professional (CIP) of the
Australian and New Zealand Institute of Insurance and Finance (ANZIIF).
Momath Ndao
Momath Ndao, Controller of Insurance Commissioner (since 1992), is in charge of
Microinsurance and training in the Department of Insurance (MEF) of Senegal. He
is also the Vice-President of the African Association of Insurance Supervisors since
May 2012. In the past, Mr. Ndao has been the Financial Advisor and
Representative of Mutual savings Funds for Desjardins Financial Security and
World Financial Group in Canada (2008-2011) and Director of Studies of the IIA of
Yaoundé (1998-2007).
Amadou Ndiouga NDIAYE
Amadou Ndiouga NDIAYE is the General Manager of Senegalese National
Agricultural Insurance Company (CNAAS) since 2008. He is also the president of
Senegalese Insurance Association Communication's group (FSSA) and Vice
President of CPI's Financing Workgroup (APIX).
Mr. NDIAYE was also the former Managing Director of PROASSUR SA and
PROASSUR VIE, Non Life and Life insurance companies of Cameroon.
He holds a Higher Diploma in Insurance Studies from Yaoundé's Insurance Institute
(IIA) and a Master Degree in Economic sciences from University of Dakar.
Hellen Olima
Hellen Olima started her career, in 1987, as an insurance officer in the defunct
Department of Insurance within the Ministry of Finance, which was elevated to an
independent body, the Insurance Regulatory Authority (IRA). She has worked with
the Supervisory Organ throughout my working life.
Ms. Olima holds a Bachelor of Commerce (Insurance), a Diploma CII and a Masters
in strategic Management (MBA).
August 2012
Jean-Luc Perron
Since 2007, Jean-Luc Perron has been a driving force in designing and creating
Grameen Crédit Agricole Microfinance Foundation, for which he has been
Managing Director since October 2008.
Mr. Perron began his career with the French Ministry of Agriculture.
In 1985, he joined the CNCA (today Crédit Agricole S.A.), where he managed credit
activities for agriculture and then financing of large-scale leisure and tourism
projects. In 1992, he created Crédit Agricole Consultants, a subsidiary specialised in
technical assistance with countries in Central and Eastern Europe and the ex-USSR.
From 1997 to 2002, he was Manager of International Participations of the Crédit Agricole Group, and as such
member of the Board of Directors of several banks in Europe and South America. From 2002 to 2009, he was
European Affairs Adviser to Crédit Agricole S.A.'s senior management.
Mr. Perron graduated from École Nationale d'Administration (ENA).
Thérèse Sandmark
Thérèse Sandmark joined the Grameen Crédit Agricole Microfinance Foundation in
April 2011 as the team's agricultural micro-insurance officer. Before this, she was
an independent micro-insurance consultant with a focus on the agricultural sector
and social performance indicators. Prior to that, she was based in Nairobi for 2 1/2
years working as Programme Officer in microfinance and microinsurance covering
the East Africa region for the Swedish Cooperative Centre. Thérèse holds a MSc in
Business and Economics from the Stockholm School of Economics as well as
Master in Microfinance from the European Microfinance Programme at the Solvay
Business School in Brussels.
El Hadji Ousmane Sy
Sy El Hadji Ousmane holds a Masters Degree in Legal Sciences from the University
of Dakar and a Degree in Insurance (DES-A) from the International Institute of
Insurance IIA Yaounde Republic of Cameroon. Mr. Ousmane is the Controller of
Insurance Commissioner / Office of Regulatory Studies and Training (BERF), since
2000 Insurance Branch of Senegal and is responsible for:
•
Monitoring the sector consolidation policy of insurance mediation
•
Management of the amenities of insurance intermediaries
•
Case tracking "studies"
•
Control of Insurance Companies
He has also worked on the framework that is used by Senegalese General Insurance.
Solveig Wanczeck
Solveig Wanczeck works as project advisor in the GIZ-competence center Financial
Systems Development based in Germany. She holds a master degree in
development finance (M.Sc.) and is engaged in agricultural insurance matters and
disaster risk management in the context of climate change. Her work mainly
focuses on the new jointly-led project RIICE (Remote sensing-based Information
and Insurance for Crops in Emerging economies). This project aims to reduce
smallholder farmers' vulnerability by setting up a global rice information system
and by developing insurance solutions based on remote sensing data.
August 2012
Patrick Warin
Patrick Warin has a background in Life, Pension and Health insurance both with
CNP Assurances (n°1 Life insurance provider in France) and with Allianz Group. He
has been in charge of the Education and Training organization for the French
insurance sector (IFPASS) until 2010. Now retired, Mr. Warin volunteers as Advisor
to the chairman of the Micro Insurance International Institute for Research (MIIIR)
funded in 2011 in France, in order to promote and organize studies, researches
and projects in the field of Micro Insurance worldwide.
August 2012
Appendix 2 - List of Speakers
Rupalee Ruchismita - Executive Director, CIRM
Rupalee is the founding head of the Centre for Insurance and Risk Management
(CIRM); a technical group, which provides micro insurance expertise to the sector.
As a pass out of the Tata Institute of Social Sciences, she has worked with the
Social Initiatives Group (SIG), a grant and research making group within ICICI Bank.
Her work has been in the field of Financial Inclusion. She has also been involved in
developing 'Catalytic Infrastructure' and is engaged in 'Policy Advocacy' in the
microfinance sector to ensure sustainable development of the microfinance sector.
She has worked in developing micro-health insurance products for community
institutions.
Ashutosh Shekhar - Agricultural Analyst, CIRM
Ashutosh holds a Post-graduate diploma in Rural Management from Institute of
Rural Management, Anand (IRMA) and graduate degree in Agricultural Sciences
from Banaras Hindu University (BHU), Varanasi. Prior to joining CIRM, he has
worked with Canara Bank as an Agricultural Extension Officer serving banking
sector in rural areas for one and half years. His primary areas of interest include
designing financial and integrated risk management tools for agricultural and
livelihood risks.
In his present capacity at CIRM, he is working on weather index insurance products
and livestock insurance products
AIC, public insurer:
The Agricultural Insurance Company of India was founded in December 2002 and commenced business in
2003.
Organisation
Share Holdings (%)
General Insurance Corporation of India
35.00
National Bank for Agriculture And Rural Development (NABARD)
30.00
National Insurance Company Limited
8.75
The New India Assurance Company Limited
8.75
Oriental Insurance Company Limited
8.75
United India Insurance Company Limited
8.75
AIC is the largest agro-insurance company in India providing area yield and weather based crop insurance in
about 500 districts of India and covers almost 20 million farmers, making it one of the biggest crop insurers
in the world. AIC is directly controlled by the Ministry of Finance, Government of India. The various
products offered by AIC have been categorized as past, present and future products. Some of these
products under all the three categories are mentioned below:
For more information visit: www.aicofindia.com
August 2012
Mr. Kolli N. Rao - Chief Risk Officer, and Head of the 'Product
Development' and 'Reinsurance' within Agriculture Insurance Company
of India Ltd. (AIC).
Mr. Rao is associated with agriculture insurance in the country for the past 25
years, and reviews undertaken by the Government of India since 1996. He has
worked on various committees constituted to review crop insurance and he is an
examiner with Insurance Institute of India since 1993, having revised course
material on 'Agriculture Insurance' twice (2002 and 2010).
Mr. Rao has spoken in various international conferences on agriculture insurance, and studied crop insurance
programs across the world. He has published many technical papers and written articles on agriculture
insurance and weather insurance. He also assisted the World Bank on a few assignments in the field of risk
mitigation and has also helped the Food & Agriculture Organization (FAO), World Food Program (WFP) and
International Research Institute for Climate & Society (IRI). His expertise is being used by a few African
countries like Nigeria, Ghana to revive the crop insurance programmes.
Karnataka State Natural Disaster Monitoring Centre
Karnataka State has the distinction of being first in the country to establish Drought Monitoring Cell (DMC) in
1988 as an institutional mechanism to monitor the Drought. Activities broadened to also include monitoring
other natural disasters and renamed as Karnataka State Natural Disaster Monitoring Centre (KSNDMC) in 2007.
Natural Disasters Management heavily depends on inputs from Science and Technology.
KSNDMC has been serving as a common platform to the various response players in the field of natural disaster
management by providing timely proactive science and technology inputs. The Master Control Facility will
strengthen the activities of the centre in providing information, reports, advisories to the community, research
organizations and the Government. The Centre provides inputs to the farming community, agriculture and
horticulture based sector, fisherman, transport sector, power and electricity sector, State and District level
Disaster Management Authorities in Karnataka through state of the art natural hazards monitoring sensors,
information and communication system.
Mr. V Prakash - Director, Karnataka State Natural Disasters Monitoring
Centre.
Karnataka State Natural Disasters Monitoring Centre is an autonomous body
affiliated with the Department of Science & Technology, Government of Karnataka,
India
He was trained as a post-graduate in earth sciences from Central College,
Bangalore; Post-graduate in Exploration geophysics from Osmania University,
Hyderabad and Post graduate in Water Resources with specialization in Remote
Sensing and GIS from International Institute for Aerospace and Earth Sciences, the
Netherlands.
He has served in various capacities in Government of India and Government of Karnataka since 1973. His
areas of specialization are:
• Monitoring, alert recognition, early warning and preparedness for management of natural hazards
• Risk management in natural disasters
• Assessment, development and management of water resources with specialization in groundwater,
and
• Remote sensing and geographical information systems (GIS).
August 2012
ICICI Lombard, private insurer
ICICI Lombard, a 74%-26% joint venture between ICICI Bank and Canada's
Fairfax Financial Holdings Ltd., offers various weather and health
microinsurance products in India. For reinsurance cover for the products
the company is working with Swiss Re, Scor and Hanover Re for
microinsurance development. ICICI Lombard introduced an index-based weather crop insurance product in 2003
and is now offering it in 14 states comprising 64 districts, covering 26 varieties of crops.
For more information visit: http://insurancenewsnet.com/article.aspx?id=253104
Mr. Navin Sharma - Vice President – Health & Weather, ICICI Lombard GIC Limited.
He has 14 years of corporate experience and has been with ICICI Lombard for the
past 10 years. He has been associated with various underwriting function (property
and casualty) before shifting to weather portfolio. ICICI Lombard is the dominant
private sector insurer in weather based crop insurance and Mr. Sharma's efforts
have been instrumental in the exponential growth of weather insurance portfolio
of the company in recent years.
IFFCO TOKIO, private insurer
IFFCO-Tokio General Insurance Co. Ltd. is a joint venture between Indian Farmers
Fertilizer Cooperative Ltd (IFFCO), formed by more than 40,000 farmers' cooperatives,
and Tokio Marine and Nichido Fire Inc of Japan. ITGI serves the insurance needs of the
economically underprivileged rural masses across India through 52 strategic business
units and a network of over 293 offices. ITGI is experienced in designing and marketing
livestock microinsurance distributed through farmer cooperatives and cooperative banks.
IFFCO-Tokio have been implementing an index insurance for livestock insurance in India for over 6 years and are
the third largest insurer after AIC and ICICI Lombard. They are grant recipients of the ILO Microinsurance
Innovation Facility under which their project aims to test a model to reduce fraud by using an identification
device placed under the hide of the animal (based on RFID technology - Radio Frequency Identification). The
current means of identifying the insured animal is through ear tags, which can easily be lost or removed. By
reducing fraudulent claims, the technology can benefit farmers through lower premiums to reflect the reduced
claims. Additionally, the technology, used to store information about livestock such as vaccinations, can support
the cooperatives and milk unions to improve herd management. The advent of more sustainable livestock
insurance can also promote more product development, and invite other actors to enter the sector.
For more information visit: www.iffcotokio.co.in
Mr. K. Gopinath - Head of Rural and Co-operatives at IFFCO TOKIO
General Insurance (ITGI)
His responsibilities include developing rural markets for IFFCO TOKIO in terms of
identifying demand for insurance products, designing new products and delivery
processes and monitoring its marketing and profitability for long term growth.
Gopinath is a winner of ILO innovation grant for a project on cattle insurance titled
"Loss mitigation in cattle insurance through RFID technology."
He has more than 24 yrs experience in Insurance industry with extensive
experience in Claims, underwriting and marketing. He holds a Bachelor in
Commerce (with Honours) and is also a Fellow of Insurance Institute of India.
August 2012
HDFC ERGO General Insurance Company Limited, private insurer
HDFC ERGO General Insurance Company Limited is a joint venture between HDFC Limited,
India's premier Housing Finance Institution, and ERGO International AG, the primary
insurance entity of Munich Re Group. HDFC ERGO offers complete range of non-life
insurance products ranging from Motor, Health, Travel, Home and Personal Accident in the
retail space and customized products like Property, Marine and Liability Insurance in the
corporate space. HDFC ERGO is the 4th largest private sector general insurance company in
India as rated by IRDA and it has acquired second position among private insurers in underwriting weather
insurance policies. HDFC ERGO has been expanding its presence across the country and is today present across
71 cities with 80 branch offices with an employee base more than 1107 professionals. The company has a wide
distribution network comprising of brokers, retail and corporate agents, bank insurance besides its own direct
sales force. HDFC ERGO has been assigned the rating of “iAAA” by ICRA indicating its highest claim paying ability.
The company also has ISO certification for its claim services.
Azad Mishra - Product Manager, HDFC Ergo
National Bank for Agriculture and Rural Development – NABARD
NABARD is set up as an apex Development Bank with a mandate for
facilitating credit flow for promotion and development of agriculture,
small-scale industries, cottage and village industries, handicrafts and
other rural crafts. It also has the mandate to support all other allied
economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity
of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with providing
refinance to lending institutions in rural areas, bringing about or promoting institutional development and
evaluating, monitoring and inspecting the client banks.
For more information visit: www.nabard.org
R Sundar - General Manager, National Bank for Agriculture and Rural
Development (NABARD) at the Tamil Nadu Regional Office, Chennai
He leads the teams responsible for Short Term Refinance to Cooperative and
Regional Rural Banks, Farm(ers) Development and Innovation interventions,
Natural Resources Management, Financing the State Government for Rural
Infrastructure and NABARD Consultancy Services. Previously he was the Head of
Tripura Regional Office of NABARD. He has also been a Faculty Member in the
NABARD Staff College, Lucknow and has been with NABARD for 25 years.
Furthermore, Mr R. Sundar has also served with the National Dairy Development Board and the National
Cooperative Dairy Federation of India. He holds a Post Graduate Degree in Mathematics (BITS, Pilani) and a
Post Graduate Diploma in Rural Management (IRMA).
August 2012
Coastal Salinity Prevention Cell
Coastal Salinity Prevention Cell (CSPC) has been
visualized as a fulcrum to develop and strengthen
various initiatives of government and civil society
organizations, aimed at addressing the issue of
salinity. Salinity is multi-sectarian and complex in nature, demanding systematic response. Considering the
complexity and the multi faceted nature of salinity problem, substantial impact was felt necessary, wherein joint
efforts of both, government and civil society organizations are required. This possibly could be done through an
umbrella organization in the form of CSPC. This resulted from a dialogue process between civil society
organizations and other partner NGOs, Sir Ratan Tata Trust and the Government of Gujarat, which issued a
circular on April 12, 2004, constituting the CSPC and its State level Steering Committee headed by Secretary
Water Resources, Government of Gujarat.
Natu Macwana - head of Coastal Salinity Prevention Cell (CSPC)
CSPC is an organisation initiated by Sir Ratan Tata Trust, Agakhan Rural Support
Programme and Ambuja Cement Foundation in Gujarat.
He started his professional carrier with drinking water and sanitation movement
that promoted decentralised drinking water harvesting system in Gujarat with a
network of NGOs named PRAVAH in 2002. He was also a senior consultant for
Chief Minister's Ten point programme being executed by Gujarat Tribal
Development Department.
Mr. Macwana provided leadership to Sajjata Sangh - a Network of 35 leading NGOs of Gujarat working on
Natural Resource Management (NRM) for four years for its rainfall insurance programme that has expanded
to more than 14 times, in terms of farmer enrolment, within two Kharif seasons. He has also pursued
fundraising with NABARD to ensure financial support to the programme for three years starting from Kharif
2010.
He holds a Bachelor's in Business Administration and a Masters in Social work.
August 2012
Appendix 3 - Participant Views
Day One
Dr. Georges Abbey: Lecturer, University of
Lome
“The objectives of the workshop are very wellaligned with our expectations and allows for
everyone to discover some important lessons. The
guest speakers are well in tune with their topics and
we wish they had more time to share their
experiences.
In Africa, we are taking our very first steps in
agricultural index insurance and we need to better
understand the challenges the Indian practitioners
encountered and how they overcame those
obstacles so that we do not repeat their mistakes.
Today, the speakers also underlined the importance
of constant innovation in order to reduce
transaction costs and increase client value.”
Pacome Bonou: Head, AMAB Production Service (Agricultural Mutual Insurance of Benin)
“This first day we learnt about the behaviour one needs to have when starting an index agricultural
insurance venture and the role farmers play at this stage. The speakers also stated that making payouts the
first season can be a powerful demonstration effect and improve take up for the next season.”
Fabrice Larue: Project Manager, Foundation for
World Agriculture and Rurality (FARM), Paris.
One of the things that struck me the most today
was that the speakers were really passionate about
their topics and managed to transmit their
enthusiasm to the participants.
It also stood out that for the establishment of a
successful index agricultural insurance the key
technical issues have been very advanced (i.e.
issues relating to infrastructure) but despite that,
there are other decisions that are more difficult like
choosing between a simpler product or a more
complex product that might better reflect the
farmers’ actual loss.
We knew that we were coming to one of the
leading countries in this field, but I discovered today
that research was conducted in the area of index
agricultural insurance since the 1920′s in India and
the current leadership stems from a long term
interest and studying of the topic.
Day Two
Sessimè Martine Dahoun: Head of Regulation –
Insurance Department, Ministry of Finance,
Benin.
It is a very good day for me because the translation
was very fluid and I was able to engage in the
discussions.
limited to agriculture. There are also other products
that are yet to be discovered in this area.
As a regulator, I realised today that the insurance
sector is not static and is in a constant movement
and we need to adapt to this reality.
Everything we learnt today was practical. I learnt
today that the Weather Index Insurance is not
Also as a regulator, we can’t just wait for the
product to appear, we have to be the part of the
movement in creating the product.
Hellen Olima: Insurance Officer and
Commissioner, Insurance Regulatory Authority
(IRA), Kenya
Department, Regulators and the Customers in
designing the product. Because of this, by the time
the pricing is done, the customer (i.e. farmers)
understand it all.
It is interesting for me to see the collaboration that
happens between the Indian Meteorological
August 2012
One of the problems we have is that the insurance
companies don’t really talk to the customer and
hence the customers don’t really understand the
product. I understand that it is a long process to
include the customer in designing the product, but
in the longer run, it creates a value chain for
customers and insurers.
Vusala Garayeva: Network Coordinator, Azerbaijan Micro-finance Association (AMFA)
I would like to see how Index Insurance works, specifically pays out, how the whole system works and how
it all integrates into the agriculture value chain.
I got a general overview and I am looking forward to the field visit to find out how it works in the real
world.
From the Field Visit
Constance Collin: University of Rennes
It was great to discuss directly with the farmers and to hear their
opinions. During the discussions we discovered many of the practical
issues that the farmers face were not always covered in the classroom
sessions.
It was also very insightful to
see the context in which these
policies are sold. They are also
excellent hosts and very
welcoming.
Jimmy Loro: Senior Adviser, GIZ.
For me, one of the key elements of a good insurance product is that it is understood at the farmers’ level.
Explaining rainfall levels to smallholder farmers was a challenge. This group bought their first insurance in
2006 and even after 6 years, they still haven’t fully understood the trigger and payout calculations. There is
a need for more financial and technical training on the product for farmers.
The presence of extreme weather events like drought resulted to higher demand for crop insurance.
I also noted that the weather data provision and the insurance companies are very closely linked. In the
Philippines, we would have seen this as a risk as we put great importance on separating these two actors in
order to ensure that the data is reliable and objective.
Oscar Chamale: Business Director: Aseguradora
Rural (Banrural Financial Group S.A)
It’s very much integrated with their other activities
and hence becomes a part of the value chain.
I was surprised by the involvement of the farmer
organisation in the management of the product and
they were even responsible for the claims process.
In Guatemala, I have not yet seen any farmer
organisation take on this role. Here the farmers
have a lot of trust in their organisations which is
why they buy the insurance.
Momath NDAO: Controller of Insurance Commissioner – Department of Insurance (MEF), Senegal
The farmers are the key actors at every step of delivering agricultural insurance and need to be involved at
each step.
The farmer organisation that we met played an important role in highlighting the obstacles of being an
intermediary between the farmers and the insurance company.
We need to listen to the farmers as they are always smarter than us. They know what they want and what
is good for them, just like the Senegalese farmers.
And they are also very hosts!

Field visit and training in Tamil – Nadul (India)

Transcription

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