Weather Insurance

Agriculture contributes 24% of the GDP of India. Therefore, even the slightest change in this sector can affect the economy. Weather insurance covers the losses that may be caused to this sector due to abnormal weather conditions including variations in temperature, wind speeds and humidity or excess of rainfall and shortage in rainfall.

Weather insurance is now a common term in countries like US, Canada, UK and other western countries. It has come into use in various industries like agriculture, food leisure, processing, energy and reinsurance. In India, ICICI Lombard is the most popular company in the field of weather insurance.

Weather insurance was developed in association with the World Bank. It was launched as a pilot scheme which was first used to insure groundnuts in Andhra Pradesh. Now, farmers and all those dependent on the weather conditions need not worry. There are several benefits of weather insurance. They include:

• High level of client comfort
• Low management expenses
• Scientifically developed objective

Weather insurance provides protection to the farmers, banks, micro-finance lenders and agro-based industries. This in turn results in boosting the entire rural economy. Some vital factors of Weather Insurance are:

• Peril Identification
• Index Setting
• Back testing for payouts
• Pricing
• Monitoring
• Claims Settlement

There are some examples of deals initiated by Weather Insurance. Oranges in Jhalawar, Rajasthan were not available for flowering. 782 farmers were aided by the Weather Insurance which provided a cover for 613 acres for a sum insured of ` 18.3 mn to them. Another example states various crops in Andhra Pradesh were provided cover when they faced losses due to deficit rainfall.

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