The introduction of a range of new technologies, including a mobile portal and the use of sophisticated drone and satellite technologies, will drive transformation of the Indian crop insurance market, according to a new report.
The study, Technology brings new opportunities for India’s crop insurance scheme, is by Lloyd’s broker New Dawn Risk.
The report details changes that have been made to the government-sponsored scheme during 2020, which are designed to make it more efficient and ultimately more attractive for the nation’s farmers and for participating insurers.
These include the introduction of a three-year contract for insurers; and strict rules to both prevent delays in claims handling and avoid moral hazard.
According to the report, one of the major requirements of the scheme has always been using Crop Cutting Experiments (CCEs) for yield estimation. However, conducting such a large number of CCEs has become a very cumbersome task, considering the short harvest period within which they all have to be completed.
In order to overcome this, the government is trying to implement various approaches, such as smart sampling and the two-step yield estimation.:
“The government has recognized that to speed up adoption of these new approaches it needs to invest and has created a fund to allow states to invest in technology and training. The new operational guidelines for the crop insurance scheme stress that insurance companies and states should work with a stated list of national bodies (such as the government weather monitoring body) to adopt these techniques.”
States are encouraged to use drones or low earth orbiting (LEO) mini-satellites to take low-flying images of crop damage caused locally, such as by hail, rain or insects, it adds, noting that drones fly below cloud level, avoiding problems with satellite imagery, while LEO satellites are small and fast-moving, providing rapid real-time updates.
“The increased use of satellites and drone imagery technology and adoption of high-quality mobile apps… means that India has taken positive steps towards increasing efficiency and reducing costs of administration,” said Max Carter, CEO of New Dawn Risk.
“We hope that, with such positive news, our guide will be a useful source of information for international reinsurers who might consider participating in this refreshed scheme.”
Alongside the prospect of new technologies comes the opportunity for capital support from the reinsurance market, according to the Agricultural Insurance Company of India:
“With the advent of new concepts in agriculture, the scope for crop / agriculture insurance in India is vast. The main challenge is consistency. The scheme has changed drastically in a very short space of time. Reinsurers believe there is ample opportunity but only if they decide to commit to this product for the longer term and take a long-term view despite the changes.”
“India could certainly see new reinsurers entering its state-sponsored agricultural insurance market if costs were driven down for the local insurers, who have previously borne heavy administrative and operating costs,” added Max Carter.