Crop Insurance

INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITY OF INDIA

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Contents:

1. About this handbook 1

2. Crop Insurance 2

3. Frequently Asked Questions 12

4. Policyholder Servicing TAT 18

5. If you have a grievance 19

1. ABOUT THIS HANDBOOK

This handbook is designed by the InsuranceRegulatory and Development Authority of India(IRDAI) as a guide on Crop Insurance i.e.insurance of crops and gives general informationonly. No information given herein replaces oroverrides the terms and conditions of coveragesmore specifically contained in AdministrativeInstructions issued by Government of India forNational Crop Insurance Programme (NCIP) orNational Agricultural Insurance Scheme (NAIS)and notifications issued by respective stategovernments for their implementation. Insurancecompanies are designated as ImplementingAgencies for implementation.No informationgiven herein replaces or overrides the terms andconditions of insurance policy in case of policiescommercially sold to individual farmers.

Please approach the intermediary like branchbank, co-operative society, duly licenced broker oragent of concerned insurance company registeredwith IRDAI for specific information regardinginsurance programme, scheme or policy foradditional information.

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2. CROP INSURANCE

a) National Agricultural Insurance Scheme(NAIS)

Crop or Agriculture Insurance covers risks ofanticipated loss in yield of various crops. Almostthe entire of Crop Insurance business comes from‘Schemes’ or ‘Programme’. These Schemes operateon principles of ‘Area Approach’. Coverage iscompulsory for farmers taking crop loans fromrural financial institutions (RFIs) for cultivation ofcrops, i.e., loanee farmers. Non-loanee farmers canalso insure their crops under the same schemes.The main Schemes available to farmers in respectof crop insurance are as under:

a) National Agricultural Insurance Scheme (NAIS)of Government of India

b) National Crop Insurance Programme (NCIP) ofGovernment of India

i. Modified National Agricultural InsuranceScheme (MNAIS),

ii. Weather Based Crop Insurance Scheme(WBCIS) and

iii. Coconut Palm Insurance Scheme (CPIS)

NAIS was introduced in the year 1999 and ispresently in operation in a few states. The Scheme

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is practically an all-risk insurance cover based on‘Area Yield Index’.

The Scheme coversall food, oilseeds and annual commercial /horticultural crops for which historical yield datais available and crop cutting experiments areplanned for the current year. State governmentsissue notifications containing names of crops, areaseligible for insurance, rates of premium etc. at thebeginning of each cropping season.

The Scheme is available to allFarmers - compulsory for borrowing farmers andoptional for non-borrowing farmers. Farmershave to fill-up a simple Proposal Form and submitthe same with premium amount at the nearestbranch of bank or Primary Agricultural CreditSociety.

SumInsured is at least equal to loan amount which canbe increased to 150% of the value of average yield atthe option of the farmer. There are limits for non-loanee farmers which are published in stategovernment’s notification. Premium rates forFood crops and Oilseeds ranges from 1.5% to 3.5%and actuarial rates are charged for AnnualCommercial / Horticultural Crops. Subsidy inpremium is available to small and marginal farmers

Which are the crops covered:

Who can insure:

What is Sum Insured and Premium:

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at 10% of premium. Some State governments offerhigher subsidy.

Network of financial institutions viz. commercialbanks, regional rural banks and cooperative banks,spread across length and breadth of country, playthe role of intermediaries. The scheme operatesbroadly on bancassurance model.

Levels of indemnity are60%, 80% and 90% which means farmers arethemselves to bear the loss of first 40%, 20% or10% respectively. This condition is also broadlycalled ‘deductible’.

The Schemeoperates on principles of Area-Yield Index orGuarantee. There is a guaranteed yield termed asThreshold Yield for every crop in everyHomogenous Area e.g. taluka, block or grampanchayat etc. Threshold Yield is moving averageof past five years actual yield (three years in case ofPaddy and Wheat) multiplied by applicable level ofindemnity. If current season’s actual yieldrecorded is lower than the Threshold yield, thenclaims become payable. Yield data used for claimsis generated under General Crop EstimationSurveys (GCES) by way of crop cuttingexperiments. Procedure of assessment and

Where to pay premium (Intermediary):

Levels of Indemnity:

What is the procedure for claims:

settlement of claims are automated processes andthe claim amount is credited to insured farmers’bank account. No paper work is required to bedone by insured farmers or intermediaries.

NCIP has three components- viz. MNAIS,WBCIS and CPIS. There are some commonfeatures for MNAIS and WBCIS components i.e.

1. Private sector insurance companies are allowed as‘implementing agencies’.

2. Rates of premium are charged on actuarial basis.Actuarial rates of premium help insurancecompanies to transfer the risk in globalreinsurance market and the governments tobudget their liabilities.

3. Premium payable by farmers is subsidizedsubstantially to make it affordable.

4. Sum insured is broadly equal to cost of cultivation.

5. All claims will be paid by insurance company asthere will be no sharing of claims by state andcentral governments.

MNAIS is an improved version of NAIS.

The Scheme coversall food, oilseeds and annual commercial /

b) National Crop Insurance Programme (NCIP)

Component – I : Modif ied NationalAgricultural Insurance Scheme (MNAIS)

Which are the crops covered:

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horticultural crops for which historical yield datais available and crop cutting experiments areplanned for current year. State governments issuenotifications containing names of crops and areaseligible for insurance, rates of premium etc. at thebeginning of each cropping season.

Available to all Farmers -compulsory for borrowing and optional for non-borrowing farmers- who have to fill-up a simpleProposal Form and submit the same withpremium amount in a nearest branch of bank orPrimary Agricultural Credit Society.

SumInsured is based on cost of cultivation and at leastequal to loans disbursed. Often the Stategovernment decides the sum insured for variouscrops for a district within the State. Sum insuredcan extend up to value of Threshold Yield.Premium rates vary from crop to crop and area toarea based on risk profile reflected in historicalyield data, past insurance and claims experience.

Network of financial institutions viz., commercialbanks, regional rural banks and cooperative banks,spread across length and breadth of country playsthe role of intermediaries. Additionally, insuranceintermediaries licensed by IRDAI are also allowedto insure non-loanee farmers.

Who can insure:

What is Sum Insured and Premium:

Where to pay premium (Intermediary):

Levels of Indemnity:

What is the procedure for claims:

New provisions on claims:

Component – II: Weather Based CropInsurance Scheme (WBCIS):

Which are the crops covered:

Who can insure:

Levels of indemnity are 80%and 90% which means farmers have to bear first20% or 10% of losses respectively.

Operates onprinciples of Area-Yield Index or Guarantee. Theguaranteed yield termed as Threshold Yield forevery crop in every Homogenous Area e.g. taluka,block or gram panchayat, is based on past sevenyears’ moving average yield with a provision forexcluding yields of maximum two calamity years.The other process is same as the NAIS.

MNAIS provides foradditional features in terms of coverage of‘Prevented sowing’, post harvest losses, individualfarm level assessment in case of localizedcalamities, and On-Account settlement of claimsin case of serious crop losses/major disasters.

The Scheme covers all food, oilseeds and annualcommercial / horticultural crops. All crops forwhich historical yield data is not available can alsobe covered.

Available to all Farmers -compulsory for borrowing farmers and optional

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for non-borrowing farmers -who have to fill-up asimple Proposal Form and submit the same withpremium amount in a nearest branch of bank orPrimary Agricultural Credit Society.

Major perils covered are deficit,excess and deviation of rainfall, relative humidity,temperature (high and low), wind speed andcombination of above. Risks of hail-storm andcloud burst can also be covered as add-on covers.

SumInsured is pre-defined and is based on cost ofcultivation, and is decided by the state for eachcrop and district. Premium rates can be amaximum of 10% for Kharif and 8% for Rabiseason with 12% for commercial / horticulturalcrops. The premium subsidy available ranges from25% to 50%.

Network of financial institutions viz., commercialbanks, regional rural banks and cooperative banks,spread across length and breadth of country playsthe role of intermediar ies . Insuranceintermediaries licensed by IRDAI are also allowedto insure non-loanee farmers.

If observedweather index value falls below or above (as thecase may be) the notified trigger value, then claims

Risks covered:

What is Sum Insured and Premium:

Where to pay premium (Intermediary):

What is the procedure for claims:

shall be calculated per unit area. Claims areassessed and settled solely based on weather data ofautomated stations installed in Reference UnitArea for the purpose. Calculation is done based onterm sheets published in notifications.Procedureof assessment and settlement of claims areautomated processes. No paper work is required tobe done by insured farmers or intermediaries.Losses for Add-on covers are assessed on individualbasis for which farmers have to intimate theinsurance company within 48 hours of theoccurrence of the insured peril.

This scheme operates largely like a non-lifeinsurance policy. It is an annual contract,administered only by Agriculture InsuranceCompany of India.

Any palm grower having at leastfive healthy nut bearing palms in a contiguous areais eligible to insure. Palms are insured in twocategories viz., palms in age group of 4 to 60 yearsin case of dwarf and hybrid palms and 7 to 60 yearsin case of tall variety.

Storm, Hailstorm, cyclone,typhoon, tornado, heavy rains, flood, inundation,pests, diseases, accidental fire, forest fire, bush fire,

Component - III: Coconut Palm InsuranceScheme (CPIS)

Who can insure:

What is covered:

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lightening, tsunami, severe drought andconsequential total loss causing death of palm ormaking it totally un-productive.

Loss due to theft, war,nuclear risks, rebellion, revolution, insurrection,mutiny, natural mortality, uprooting etc.

Sum Insured forpalms within the age group of 4th to 15th year isRs. 900/- and premium is Rs. 9.00 per tree whilefor palms within the age group of 16th to 60th yearis Rs. 1750/- and premium is Rs. 14.00 per tree.Subsidy of 75% is available. Farmer pays only 25%of premium amount.

Claims have to intimatedto the insurance company within 15 days fromoccurrence of peril. Claims will be assessed onindividual basis and claims amount will be releasedto insured farmer.

What is not covered:

Sum Insured and premium:

Assessment of claims:

Flow ChartLOANEEFARMER

NON LOANEEFARMER

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3. FREQUENTLY ASKED QUESTIONS

Q 1: What is crop insurance?

Q 2: What are the objectives of AgriculturalInsurance Scheme?

Q 3: What are the various risks covered under cropinsurance scheme?

Ans: Crop insurance is an arrangement aimed atmitigating the financial losses suffered by thefarmers due to damage and destruction of theircrops resulting from various production risks.

Ans: The objectives are:-

• To provide financial support to the farmers in theevent of failure of any of the notified crop as aresult of natural calamities, pests and diseases.

• To restore the credit worthiness of farmersarising out of crop losses leading to non-repayment of crop loans.

• To encourage the farmers to adopt progressivefarming practices, high value in-puts and highertechnology in Agriculture.

• To help stabilize farm incomes, particularly indisaster years.

Ans: The Scheme provides comprehensive riskinsurance for yield losses due to: (i) Natural Fireand Lightening, Storm, Hailstorm, Cyclone,

Typhoon, Tempest, Hurricane, Tornado, Flood,Inundation and Landslide (ii) Drought, Dryspells (iii) Pests / Diseases etc. in Area-YieldIndex insurance Schemes and Weather indicesunder WBCIS or Weather Index based cropinsurance Scheme.

Ans: NAIS and MNAIS cover cereals, millets, pulses,oi lseeds, Annual Commercial/AnnualHorticultural crops. The crops are selected forinsurance if the past yield data for 10 years areavailable, and the State government agrees toconduct requisite number of yield estimationsurveys to estimate the yields during theproposed season. However, almost any crop canbe covered under WBCIS for which a broadcorrelation can be established between weatherparameters and anticipated loss in crop yield.

Ans: All farmers growing notified crops in notifiedareas as notified by the State government areeligible for availing insurance. Crops of loaneefarmers are compulsorily insured, while non-loanee farmers can insure their crops at theiroption.

Q 4: What are the various crops covered under theschemes?

Q 5: Who is eligible to be covered under theschemes?

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Q 6: How is this crop insurance schemeadministered?

S.No Name of the Company

Ans: Selecting of Insurance Company to do cropinsurance in the State is decided by the concernedState Government only and it may vary fromseason to season.The following general insurancecompanies are empanelled by Govt of India totransact Crop Insurance:

1. Agriculture Insurance Company of IndiaLimited,

2. ICICI Lombard General Insurance Co. Ltd.

3. IFFCO TOKIO General Insurance Co. Ltd.

4. HDFC ERGO General Insurance Co. Ltd.

5. Cholamandalam MS General Insurance Co. Ltd.

6. Tata-AIG General Insurance Co. Ltd.

7. Future Generali India Insurance Company Ltd.

8. Reliance General Insurance Company Ltd.

9. Bajaj Allianz General Insurance Co. Ltd.

10. Universal Sompo General Insurance Co. Ltd.

11. SBI General Insurance Co. Ltd.

This list is indicative only and subject to change by Govt of India from time to time.

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Q7: What is the Unit of Insurance?

Q 8: What is the amount of sum insured underNAIS and MNAIS?

Note:

Ans: The size of unit area varies from State to State andcrop to crop. Presently, the unit of insurance isBlock/ Mandal/ Taluka / Patwarihalka / NyayaPanchayat/ Gram Panchayat/ Village, etc., as perthe convenience of the concerned stategovernment.

Ans: a.For loanee farmers (compulsorycoverage): Theamount of crop loan availed for the notified cropis the minimum amount of sum insured coveredon compulsory basis. However, a loanee farmerso wishes he may insure his crop for a higher SumInsured i.e. upto the value of Threshold Yield (i.e.guaranteed yield) or upto 150% value of averageyield by paying premium on actuarial basis forthe difference in the sum insured.

b. For Non-loanee farmers: Coverage at normalrates of premium is available upto the value ofThreshold Yield. Additional coverage upto 150%value of Actual Yield can be availed by paymentof premium at actuarial rates for the difference insum insured.

In case of annual commercial and horticulturalcrops, only actuarial rates of premium arecharged at all the slabs of sum insured.

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Q 9: How much premium a farmer has to pay to getthe insurance cover?

Q10: Does a non-loanee farmer need to producesome documents for obtaining insurancecover?

Ans: NAIS: Flat rates of premium ranging from 1.5%to 3.5% are applicable for food and oilseeds crops.For Annual Commercial and Horticulturalcrops, actuarial premium rates are charged.Subsidy in premium to the extent of 40% to 75%is available to all farmers to make it affordable.

MNAIS and WBCIS:Actuarial rates of premiumare charged which vary from crop to crop andarea to area. Subsidy in premium is available to allfarmers to make it affordable.

Ans: The non-loanee farmer has to produce a proof(copy of land pass book / 7/12 extract / landrevenue receipt etc.) to prove that he / she is theowner of the land. In case of sharecroppers andtenant farmers (who are not availing crop loan), aproof showing crop sharing / tenancyarrangement need to be produced.

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Q 11: Are crop loans disbursed through KisanCredit Cards (KCCs) eligible for insurancecoverage under the NAIS?

Q 12: When and how, the claims are settled underNAIS and MNAIS?

Ans: Crop loans disbursed/withdrawn through KCCsare also eligible for coverage as per the terms andconditions applicable to the regular crop loans.

Ans: In case of widespread calamities, the losses areassessed on area approach basis. Any insured cropin a notified area recording lower actual yieldthan the guaranteed yield as per the crop yieldestimation surveys of the State government shalla u t o m a t i c a l l y b e c o m e e l i g i b l e f o rcompensation/ claim. The shortfall in yield isdetermined for each crop and is the differencebetween the guaranteed yield and the currentseason's actual yield. Shortfall percentage ismultiplied with the sum insured to arrive at theclaim amount. Claim amount is released to thebanks soon after approval and receipt of funds/subsidy from the government, who in turncredit the account of eligible farmers.

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Q 13: Whether annewari or any similar declaration/certification by the revenue or agriculturedepartments of the State government atvillage/block /district level has any bearing onclaim settlement?

Q14: Whether insured farmers whose crops aredamaged need to intimate crop losses tobank/AIC to be eligible for claim?

4. POLICYHOLDER SERVICING ANDTURNAROUND TIME

Ans: No. Claims under the scheme are settled strictlyas per the provisions and guidelines described. Sodeclaration of flood/drought/annewari by anyother agency/authority has no bearing on theclaim.

Ans : In case of "Area approach", the farmers need notintimate crop losses to bank/AIC. The croplosses, if any, or reduction in yield as compared toGuaranteed yield are determined from the CropEstimation surveys and the shortfall in yield, ifany, shall be paid as claim through the bank. Incase of areas notified under localized calamitiesfor individual loss assessment, the farmer needsto intimate the crop loss within 48 hours.

Loanee and non-loanee farmers insure their cropsthrough financial institutions and licensedintermediaries. Insurance companies receive

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‘Declaration Forms’ for underwriting whichcontain consolidated information. Collectionreceipts are issued to financial institutions andintermediaries after receipt of premium amount.‘Acknowledgements’ are issued to these channelpartners after process of underwriting is over.

NAIS and MNAIS claims are processed uponreceipt of actual yield data. Cut-off dates forreceipt of actual yield data is published innotifications issued by State governments beforebeginning of each season. Insurance companysettles the claims soon after receipt of share offunds from State and Central governments incase of NAIS and as early as possible in case ofMNAIS. WBCIS claims are settled within 45 daysfrom last day of period of insurance, subject toreceipt of premium subsidy.

The Consumer Affairs Department of theInsurance Regulatory and DevelopmentAuthority of India (IRDAI) has introduced theIntegrated Grievance Management System(IGMS) which is an online system for registrationand tracking of grievances. You must registeryour grievance first with insurance company andin case you are not satisfied with its disposal bythe Company, you may escalate it to IRDAI

5. IF YOU HAVE A GRIEVANCE:

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through IGMS by accessing www.igms.irda.gov.in. In case you are not able to accessinsurer’s grievance system directly, IGMS alsoprovides you a gateway to register your grievancewith the insurer.

Apart from registering your grievance throughIGMS (i.e., web), you have other channels forgrievance registration – through email(complaints@irda.gov.in), through letter(address your letter to Consumer AffairsDepartment, Insurance Regulatory andDevelopment Authority of India, 3rd Floor,Parishram Bhavan, Basheerbagh, Hyderabad-500004) or a simple call to IRDA Grievance CallCentre at Toll Free number 155255/1800 4254732 through which IRDAI shall, free of cost,registery our complaints against insurancecompanies as well as help track its status. TheCall Centre assists by filling up the complaintform on the basis of the call. Wherever required,it facilitates in filing of complaints directly withinsurance companies as the first port of call bygiving information relating to the address,telephone number, website details, contactnumber, email id etc. of the insurance company.IRDAI Call Centre offers true alternativechannel for prospects and policyholders, with

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comprehensive tele-functionalities, serving 12hours X 6 days from 8 AM to 8 PM, Monday toSaturday in Hindi, English and various Indianlanguages.

When a complaint is registered with IRDAI, itfacilitates resolution by taking up with theinsurance company. The company is given 15days time to resolve the complaint. In case thecomplainant is not satisfied with the resolutionof the complaint by the insurer, he may approachthe Insurance Ombudsman for amicableresolution or adjudication by the InsuranceOmbudsman in terms of Redressal of PublicGrievances Rules, 1998 (For details visitwww.gbic.co.in).

INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITY OF INDIA

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