Too little rain is bad news for farmers. Rainfall data provided by CCAFS scientists to the world’s largest agricultural insurance company means Indian farmers can now take out ‘weather-based insurance’ to protect themselves when rains are scarce. This kind of insurance pays out automatically if the rainfall is below a threshold previously set by the insurance company based on historic data.
The Agricultural Insurance Company (AIC) of India, which insures 20 million farmers, used the rainfall thresholds developed by CCAFS scientists to improve weather-index insurance for rice and other important crops. The thresholds take into account data on land use, weather patterns, soil and crop management, and regional crop models. Indian farmers can now shield themselves from devastating crop losses and can be certain of prompt compensation in the event of crop failure because of drought. In the first year alone, AIC provided 50 000 farmers with this weather-index insurance, and this number will almost certainly rise.
Unfavourable weather can trap farmers and households in poverty. The risk of bad weather often discourages farmers from trying out innovations, such as new types of seed or new technologies that could help them produce more and even help them become more resilient to changing weather conditions. Conventional crop insurance works by assessing farmers’ loss or damage, but it does not work so well in developing countries because assessing loss and damage is often time consuming and difficult to arrange.
Weather-index insurance, on the other hand, pays out on threshold rainfall or temperatures for the crop insured measured at defined locations. This means that insurers do not have to assess each farmer’s loss separately and, because of this, that farmers receive insurance payouts quickly.
India introduced weather-index insurance for farmers in 2003. In 2007, the national government adopted it as an alternative to crop-yield index insurance. By 2012, weather-index insurance covered around 12 million farmers, 40 different crops and 15 million hectares against weather-related losses.
“Having an insurance contract could enable farmers to try new types of seeds, innovative production technologies and invest in new livestock breeds.” Pramod Aggarwal, CCAFS South Asia Regional Program Leader
For weather-index insurance to benefit farmers, insurance companies need robust data that reflects the realities on farms. In India, CCAFS has played a critical role in improving agricultural insurance products to meet the needs of farmers by providing AIC with state-of-the-art weather data. As millions of India’s farmers increasingly feel the effects of climate change, this type of insurance will become a lifeline for many of them.
- Outcome case: Improved rainfall thresholds for index insurance in India
- Blog story: Rainfall indices help insure more than 50,000 farmers
- Research Priority: Weather index-based insurance
- Research in Action brief: Weather index-based insurance: A tool for managing climate risk