Comparison of different crop insurance models in Nepal. Sunil K. Singh Senior Agriculutural Economist, MoAD

Transcription

1 Comparison of different crop insurance models in Nepal Sunil K. Singh Senior Agriculutural Economist, MoAD 1

2 Outline of Presentation Introduction Risk in Agriculture Tools and technique for minimizing agriculture Risk Risk Management in crop Production Types of crop insurance model Comparison of existing insurance models in Nepal Suitable crop insurance Products for Nepal 2

3 Introduction Yield fluctuation is a severe problem in agriculture Variations in climate and its adverse effects increase in disease and pest infestations are the main causes The influence of such external factors can hardly be avoided. 3

4 Risk in Agriculture There 3 are major types risk in agriculture ; Production risk Price Risk Market risk 4

5 The major tools and technique that applied to Tools and technique for minimizing minimize the agricultural risk are; agriculture Risk For production risk Crop and Livestock Insurance For price Risk - Minimum Support Price (MSP) For market risk - Contract farming (CF) 5

6 Risk Management in crop Production There are different methods that applied to minimize the risk in crop production are ; a) Avoiding Not to grow the risky crop b) Preventing- Using different crop production practices c) Sharing- Share cropping d) Transferring- Crop Insurance e) Spreading- Re-insurance 6

7 Why we need crop production risk management tools (Insurance)? crop insurance? A) For Farmers : Insurance can avoid the loss incurred due to fluctuation of weather Rainfall : deficit rainfall, Excess rainfall, consecutive Dry/ Wet days, Number of rainy days Temperature : Maximum temperature (Heat), Minimum temperature (Frost) Relative Humidity Wind : Speed Pest and diseases proxy : combination of rainfall, temperature and humidity Fire Flood Quality of inputs Market prices 7

8 Why we need crop insurance? B) For Banks : - Insurance increase repayment capacity of debater - Avoiding the risk of non payment in events of crop failure and damage C) For Government : Reducing the payment of relief package A prosperous stable and happy nation D) It brings stability in area under cultivation E) it brings stability in farmers income D) It provides stable market for consumer and traders 8

9 Types of Crop Insurance A) Based on Perils insured a) Single Peril Insurance b) Multi peril Insurance B) Based on object insured a) Single crop insurance b) Whole farm insurance C) Based on Administration a) Public insurance b) Private insurance D) Based on scope and application a) Voluntary insurance b) Compulsory insurance 9

10 Major Crop insurance Products 10

11 Major Crop insurance Products A) Single-peril insurance: It covers against one peril or risk, e.g. hail. This product is chiefly operated by private companies. The subsidy scheme is non-subsidized and partially subsidized. This product has been applied in Canada, Chile, South Africa, Morocco, and Uruguay. 11

12 B) Multi Peril Crop Insurance (MPCI) Multi peril crop insurance (MPCI) covers combination of several risks. Major Crop insurance Products It is the most widely used crop insurance product. Applied in Argentina, Brazil, Cuba, Columbia, Honduras, Japan, Mongolia, Morocco, South Africa, Ukraine, Uruguay, Venezuela and Nepal The product is non-subsidized and partially subsidized in those countries. The loss compensation is made based on the yield coverage level minus realized yield. 12

13 Major Crop insurance Products C) Revenue Insurance The revenue insurance combines yield and price risks coverage in a single insurance product. It can be product-specific or whole-farm. There are many revenue insurance products developed and applied globally. This product is mainly found in the USA as a publicly subsidized model. This product is being applied as a pilot form in Mexico. 13

14 Major Crop insurance Products D) Whole farm Insurance This type of insurance product covers a combination of guarantees for the different agricultural productions in a farm. Depending on the coverage of the guarantees, it can be whole-farm yield insurance, or whole-farm revenue insurance or whole farm income insurance. This insurance product is found in the USA and Japan having privately and publicly operated with partial subsidy scheme. 14

15 Major Crop insurance Products E) Area Yield Insurance The area yield insurance product is also called group risk plan or area index insurance product. It is relatively new one, and considered alternative of MPCI. Indemnities are computed from the decrease of the average yield in an area. This insurance product is applied in the USA, Canada, Chile, Morocco, India etc. The product is privately and publicly operated with non subsidized and partial subsidy scheme. 15

16 Differences of implemented insurance model in Nepal 16

17 Parameters Commercial Insurance Community managed insurance Insurance Unit Crop area should < 1 Kattha No. of animals No. of Fruit trees Crop area should < 1 Kattha No. of animals No. of Fruit trees Coverage and Limited Village level Networks Premium Rate Different Rate for different product Fixed premium rate for all Eg. Crop and livestock 5%, products ie 8-10 % Lump sum Commercial poultry 1.25 %/ Batch Fisheries 2 % Threshold yield Presently not covered Partially covered Claim settlement 90% in case of total loss and up to 50 levels % in case of total partial loss Ways of claim - The claims are settled based on the settlement final loss assessment report submitted by Govt. Agricultural office/govt. employed technician 80% in case of total loss based on community consensus The claims are settled on recommendation self help group/ Co-operative leader - On the spot claim settlement 17

18 Parameters Commercial Insurance Community managed insurance Customers/ Farmers involved Commercial farmer Small & Subsistence farmers Premium pay back pay back in case of No claim For crop period and pay back in Model case No claim Implementing agency Support Agency/Regulatory agency Non Life Insurance private Companies MoF, Beema samittee, MoAD Self-help Group/Co-operative MoF, ADBL, Karja surakchhan 18

19 Suitable crop insurance Products for Nepal 19

20 Suitable crop insurance Products for Nepal Types of crop insurance Basis of claim settlement A. Traditional Individual Farmer Insurance Single peril (eg Flood) Named peril (eg Flood, Fire, Insect and pest infestation etc) % of damage % of damage B. Crop Index Insurance 1. Area yield Index insurance Area yield index 2. Crop weather Index insurance - Micro weather (Individual farmers) Weather index ( eg Rainfall) - Meso weather ( Financial intuitions) Weather index ( eg Rainfall) - Macro weather (Insurance company/govt.) Weather index ( eg Rainfall) 20

21 Thank You