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View from India - Technology and crop insurance can mitigate climate-change impact

Source: Asia Insurance Review | Sep 2023

While the insurance industry and Indian government are putting in efforts to support the country’s agriculture sector from the vagaries of climate change, technology is perhaps the best solution in the present circumstances. Bajaj Allianz General Insurance’s Mr Ashish Agarwal talks about how technology can be the right answer. 
By Anoop Khanna
A2019 study Risk and Vulnerability Assessment of Indian Agriculture to Climate Change conducted by the Indian Council of Agricultural Research (ICAR) found that out of a total of 573 districts in the country, 109 districts are in the very high-risk category, while 201 districts come under the risky category.
Agriculture is an important and high-priority part of the Indian economy as more than 58% of the country’s population depends on it for its livelihood. With the level of vulnerability that has been revealed by this study and the changing climatic patterns and uncertainties of weather, the threat to food security and to our economic prowess has increased tremendously.
Speaking with Asia Insurance Review, Bajaj Allianz General Insurance head of agriculture business Ashish Agarwal said, “Climate-resilient agriculture, along with suitable risk mitigating options like crop and parametric insurance, is very crucial to protect our agriculture system and ensure food security in the country.
He said, “Many policies and initiatives have been launched by the federal as well as state governments to ensure food security and also protect the interest of farmers. Today, the agriculture and farming activities are being provided with opportunities to increase productivity and production both through advanced technologies and financial support.”
Climate change impacts
He said, “However, in recent years, the impact of climate change has been rapid and with the increase in temperatures, frequent and extreme heatwaves, droughts, floods, extreme rainfall events and intense cyclonic activities the mitigating efforts have not been able to keep pace.”
According to government data as presented to the parliament in the last three decades, the production of major crops in the country has fluctuated in view of climate change. As per the Ministry of Agriculture, crops standing over 33.9m hectares were lost to hydro-meteorological calamities during 2015-16 to 2021-22.
A study carried out by India Meteorological Department found that a significant increasing trend is observed in the frequency of heavy rainfall days across the country.
Mr Agarwal said, “Indian insurance companies are doing their bit in this regard. We offer coverage for climate related risks to the farmers through two government subsidised Weather-Based Crop Insurance Scheme and Pradhan Mantri Fasal Bima Yojana (PMFBY), which mitigates the financial impact of climate change on the farmers.”
Technological initiatives
In July 2023 the Ministry of Agriculture and farmers welfare introduced several new technological initiatives under the PMFBY. The new changes and initiatives are expected to empower farmers and streamline operations.
The new technology-driven yield estimation system (YES-TECH) manual is a comprehensive guide developed after extensive testing and piloting in 100 districts. It facilitates the implementation of the technology-driven yield estimation system, offering methodologies, best practices and integration insights for accurate yield assessments.
The WINDS portal initiative is a centralised platform that hosts, manages and processes hyper-local weather data collected by automatic weather stations and rain gauges. The portal enhances risk assessment and decision-making in crop insurance, agriculture advisories, and disaster mitigation, supporting the agricultural sector and rural economy.
The introduction of a new app on the Android platform aims to revolutionise the enrolment process, bringing it directly to the doorstep of farmers. This door-to-door enrolment ensures a seamless and transparent process, making crop insurance more accessible and convenient for farmers.
Insurance covers
Mr Agarwal said, “These insurance schemes are helping Indian farmers to a great extent in coping with their financial liabilities due to weather uncertainties, however, there are still a significant number of farmers who are either not aware about these insurance solutions or are not participating in these programmes because of its premium, low affordability, inaccessibility, lack of trust, poor risk perception and delay in claim payouts.”
The government had set a target to bring at least 50% of the gross cropped area under the ambit of crop insurance within three years of the launch of PMFBY in the year 2016. Until the end of March 2023, however, the actual coverage was only in the range of 30%.
Mr Agarwal said, “Efforts are being made by the governments and all participating insurance companies to educate the farmers about the importance and benefits of crop insurance by providing them direct financial benefits and making the enrolment process easier through technological interventions.”
PMFBY is the world’s largest crop insurance scheme in terms of farmers enrolled. Since implementation in 2016, around 380m farmers have been enrolled and over 124m farmers have been paid their claims.
The scheme has been successful in providing financial assistance to farmers who have suffered crop losses due to natural calamities. During this period, farmers contributed nearly INR252bn ($3.05bn) as their premium and in return, they received claims amounting to over INR1300bn.
This translates to approximately INR514 in claims for every INR100 of premium paid by the farmers. However, the total premium paid to the insurance companies from farmers and the government subsidies was close to INR2000bn.
Additional efforts
Mr Agarwal said, “In addition to government subsidised insurance programmes, insurance companies have now started offering parametric insurance products which pay out a predetermined amount when specific triggers, based on weather or climate data, are met. It provides a faster payout compared to traditional insurance and is well suited for climate related risks.
“These parametric products are as of now, limited to horticulture, medicinal and fodder crops which are not covered under the government insurance schemes, but their demand is consistently increasing, especially from the corporates involved in agribusiness and other farmer organisations.”
He said, “The insurers are also coming out with apps which help them make informed decisions about sowing, planting, irrigation, and crop protection. Satellite imagery and drones are being used for crop health monitoring and assessing the impact of weather events, aiding in early interventions.”
The government has made it mandatory for the states to give 30% weightage to the technology-based crop loss assessment using various crop models and remote sensing technology under the PMFBY through its YES-TECH initiative.
Mr Agarwal said, “Mobile apps and technology are being used for monitoring not only crop health but also for monitoring the health and nutrition level of livestock, which is extremely useful in managing the changing climatic conditions.”
Agriculture research organisations are in the process of developing crop varieties which are more tolerant to heat, drought, and flood, and they are also recommending that farmers change the cropping pattern and crop cycles to adapt the climatic change.
According to information provided by the government to the Indian parliament the ICAR has developed and released 41 water logging tolerant varieties and hybrids of different crops for commercial cultivation during 2014 to 2021.
Mr Agarwal said, “PMFBY and other agriculture insurance products are helping farmers build resilience against the challenges posed by climate change, providing them with financial security and encouraging sustainable agricultural practices.
“A lot more, however, needs to be done to customise these products to meet the specific needs and challenges of different regions of the country. Also, continued investment, training and support are crucial to harness the potential of technology in mitigating the impact of climate change on Indian agriculture.” A 
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