ICICI Lombard rolls out weather insurance

Product aided by satellite to enable accurate yield assessment.

ICICI Lombard General Insurance, in association with Weather Risk Management Services (WRMS), has launched a hybrid weather-cum-satellite imagery-based insurance product in India to cover the risk of farmers growing wheat in the Patiala district of Punjab.

Although weather-based crop insurance covers are available, ICICI Lombard's product is unique as it uses satellite-based imagery to assess crop yields.

The Jharkhand and Tamil Nadu governments have also agreed to introduce the same product in some of their districts.

The product, if successful, is likely to significantly reduce the time required for estimating the yield of an area by carrying out crop-cutting experiments. The procedure can also verify the accuracy of crop-cutting experiments conducted to assess yields.

Using the insurance product, yield will be determined on the basis of a Normalised Difference Vegetation Index (NDVI), which is a simple numerical indicator derived from satellite or aerial images for assessing the crop health at any particular point of time.

This data will be augmented by using four other parameters, namely, soil, moisture data from satellite images, temperature and rainfall data from ground weather observatory stations.

While the NDVI data are calculated from satellite images taken at a resolution of 0.050 x 0.050 (latitude and longitude), soil moisture data will be derived from 0.5°X0.5° images.

Compare this to crop-cutting experiments for calculating actual yield estimation, wherein a simple multiple-peril crop insurance product's actual yields of an area are benchmarked to average yields of the last 3 to 5 years.

The actual yield estimation of an area is done by carrying out a specified number of crop-cutting experiments. Payouts in the weather-cum-satellite imagery insurance are made by comparing the yield derived from the above-mentioned four factors with the normal yield. If the derived yield is less than the specified percentage of the normal yield, the farmer is compensated for the difference.

In the present National Agriculture Insurance Scheme (NAIS), although Agriculture Insurance Company of India decides the claim amount, the process is administered by the Union government and takes more than a year for the farmer to receive the claim amount.

With the use of the hybrid weather-cum-satellite imagery, claims can be settled within 30 days.

Says Alok Shukla, head of product development, WRMS, "A cover based on the above-mentioned four parameters inherits features of both the existing form of crop insurance. It gives a good and accurate estimate of yield like the crop yield insurance scheme (NAIS), but with lower administration cost and a faster and transparent claim settlement process. On the other hand, it also takes into account weather parameters of ground station as most of the crop losses are due to adverse weather condition."

"The concept can also be used for crop monitoring and predicting foodgrain production more accurately, which would tremendously benefit farmers to plan their sales on time and the government to take necessary measure to avert any possible foodgrain shortage."