1. M.Karthikeyan, Program Leader 11-13th April 2012 University of Twente Micro Crop Insurance for Enhancing the Livelihoods of Small Farmers- Pilots by DHAN Foundation

2. 1.About DHAN Foundation 2.Context of DHAN’s action research on micro crop insurance 3.Crop insurance initiatives 4.Action research on product design and delivery 5.Challenges in need of further research Content of my presentation

3. About DHAN Foundation DHAN is a grassroots development organisation working with 0.9 million poor families across 12 states in India Currently working with around 287000 farming families as part of Tank-fed Agriculture and Rainfed Farming programs Has been taking up insurance related interventions since 1997

4. Risk context of tank-fed and rainfed farming families Controllable risks ?!!! Pests Diseases Weeds Uncontrollable risks Rainfall – Deficit (major), Excess, Mismatch in distribution Climate change

5. Risk context of tank-fed and rainfed farming families… Deficit rainfall, a production risk, is a major risk affecting more than 60 to 80 % of the yield –25% of annual income drop is noticed –Directly affect in rainfed agriculture –Indirectly affect by inadequate filling of rainfed tanks in tank-fed agriculture It is recurrent

6. Market context Insurance companies were not able to meet the location specific needs through customized policies on a micro scale –An exclusive issue like un-controllable pest problem -Difference in crop practices across the locations and so the risk -Affordable and functional farm unit size

7. Agriculture insurance demand context Lack of knowledge on insurance Farmers not ready to pay actuarial based premiums- Classic problem in pricing risk: People forget bad events Lack of customised products Lack of free access to institutions offering insurance Lack of effective insurance delivery mechanism

8. DHAN intervention context As part of a comprehensive intervention program involving natural resource management (land development, tank rehabilitation), crop production support like supply of quality seeds, microfinance for agriculture & livestock development With farmers’ organisations as platform

9. Organisational context Instit utions 1 5-20 members Men/women farmers Adjacent land holders Microfinance as supporting tool 10 – 20 UK in 2 – 3 villages Institutions 150 to 200 UK in 10 to 15 villages Rainfed Farmers Association Uzhavar groups (UK) Rainfed Farmers Federation Research Institutions, Banks, Agriculture department

10. Crop insurance initiatives Products piloted Deficit Rainfall Insurance Dryspell insurance Mutual Deficit Rainfall Insurance Mutual Pest Insurance Mutual Crop Income Insurance

11. Enrollment so far Sl.noYear &TypeNo of farmersExtent (hec) Premium (Rs.) Claims (Rs.) 12004-05 Colla27258.005016853673 22005-06Colla604142.00151095 3 2006 - 07Colla & Mutual 374 136.00 80,426 - 4 2007 - 08 Mutual 909 726.33 2,45,166 7,16,325 5 2008 - 09 Mutual 1,042 566.50 4,64,288 3,03,152 6 2009 - 10 Mutual 1,051 617.11 4,69,014 88,680 7 2010 - 11Mutual & Colla- AIC 5,914 1,558.76 15,58,244 23,90,354 8 2011 - 12 Colla- AIC 5,633 1,164.23 10,09,838 2,75,040

12. Action research on product design Design issueChanges explored First year: Single phase deficit rainfall index products customised to the specific site; Farmers’ perception of rainfall requirement – quality and criticality as the basis for design Changes in the 2nd year based on learning in the first year Mismatch between the policy date and actual sowing date- basis risk Preparing in advance policies for various dates in the sowing season at 5 days interval and selection of the nearest day policy based on actual sowing date. Excess rainfall in one day skewing the index & ineffective low amount of rainfall inflating the index Max. rainfall limit per day as 60mm and min. as 5mm.

13. Action research on product design… Design issueChanges explo Rainfall in the first week of a segment (Say July 25th to Aug 23rd) and in the last week of next segment (Say Aug 24th to Sep 23rd), with continuous dry spell in between for 6 weeks skewing the index Increasing segmentation of crop period from 4 to 5. Rainfall cap for each segment based on historical average Based on crop water requirement

14. Action research on product design… Design issueChanges explo Changes in the third year over the second year Single phase policyMultiple phase policy- More close to water requirement of the crop Max. rainfall per day 60 mmTo 40 mm- Improve the effectiveness

15. Action research on product design… Design issueChanges explored Changes in the fourth over the third year Spatial basis riskInstallation of raingauges in the working villages and using their data for payout calculation -158 automatic raingauges installed at 2 to 8 km radius

16. Action research on product design… Design issueChanges explo Changes in the fourth over the third year… Weather index based insurance for groundnut Mutual crop income insurance -Design did n ot properly reflect the impact of ‘pattam’- ideal sowing period -Indemnity based -Difficulty in evolving a near perfect product – significant basis risk exist even after lot of fine tuning -Both yield and price risk covered -Difficult to comprehend by farmers; they see the results and not the only parameter covered by the index

17. Action research on product delivery mechanism Delivery issueChanges explored Less flexibility of the insurance companies in terms of coverage of crops, products and organisations involved Co-creation with private insurer- joint product design and delivery Mutual model with reinsurance support from Achmea Re Co-creation with public insurer

18. Mutual crop insurance Mutual crop insurance is a ‘process based’ insurance mechanism, built on time tested mutuality practice in the farming community It is owned by the insured farming community, and designed and managed by the wiser farmers from the insured farming community

19. Why DHAN went for Mutual Crop Insurance?... To meet the location specific needs Housing design, implementation and decision making with the local community  There by increasing their ownership and awareness  Thereby attempting to link risk transfer and risk education and prevention

20. Inspiration and Support for this initiative Experience of mutual crop insurance in Netherlands The training and technical support given by Mutual Insurance Association of Netherlands (MIAN) and financial support and back up guarantee support given by Achmea Re

21. Community organisation (CO) for livelihood enhancement and risk management- RFDP Instit utions 1 5-20 members Men/women farmers Adjacent land holders Microfinance as supporting tool 10 – 20 UK in 2 – 3 villages Institutions 150 to 200 UK in 10 to 15 villages Rainfed Farmers Association Uzhavar groups (UK) Rainfed Farmers Federation Research Institutions, Banks, Agriculture department Mutual Insurance Committee Banks

22. Modalities of mutual crop insurance A Mutual insurance committee (MIC) has 15 to 30 members The generic roles of this committee is Policy making and reviewing the policy Implementation of the insurance product along with staff The specific roles will vary depending on the product

23. Challenges in need of further research Insurance education – what works and what does not How crop insurance can become demand driven? Combining risk transfer with risk education and reduction practices in agriculture

24. Challenges in need of further research… Conducive policy for crop insurance product development and delivery Modalities of investing on Customised product development for an area/crop Infrastructure and data (raingauges) Modalities for reinsurance Addressing affordability issue

25. THANK YOU!