With nearly six out of every ten rural households dependent on agriculture as their principal means of livelihood, the importance of agriculture in our economy cannot be over-emphasized. With about 15% share in the country’s gross domestic product, agriculture and allied sectors are among the largest contributors to economic development. In short, farmers play a pivotal role. As the level of mechanization in agri-sector grew, tractors, which in the 40s-50s were entirely imported for use, have become popular among our farmer brothers with domestic production of these vehicles growing in full swing. An important question to ask is, why buy a tractor? The answer lies in understanding the usage of a tractor. With labor costs rising at a stupendous pace for our farmers, inputs today form nearly one-third share of the total farm budget. By mechanizing large chunks of this pie, a farmer can ensure ease of operation and drive efficiency especially when it comes to small landholdings and inter-culture operations. A machine with a compact design and adjustable rear track width is ideal for operating in between two crop rows as well as in orchards for a variety of inter culture applications. For farmers who must execute multiple applications like rotavation, cultivation, sowing, threshing, spraying operations as well as haulage operations, a tractor is their best weapon. Good tractors cost upwards of a few lakhs. With the average farm household making roughly Rs 7,000 per month and over 65 per cent of households having less than one hectare of land, financing or loans is the only way for an average famer to buy a tractor. Therefore tractor financing is a crucial cog in the entire spectrum of tractor industry. Targeted schemes that allow for longer and fixed moratorium on payment of tractor loan interest, in sync with climate realities, and big interest sops can facilitate more tractor sales, thereby enlarging the tractor insurance addressable market. Unfortunately, farmers are extremely exposed to the whims of the nature. This can potentially cripple or cause financial distress. Accidental damage to the tractor or other farming vehicles too are common occurrences. Additionally, the damage of the tractor due to any accidental occurrence or rising instances of theft can harm the farmer in more than one way. Third Party liabilities too are common from the usage of the tractor. A standard tractor insurance essentially acts as a shield for own damage, Third Party liability and Personal Accident. Risks ranging from fire, explosion, riot, strike to earthquake, flood, cyclone, hailstorm, landslide to even accidents whilst in transit by road, rail and inland waterway, can destroy a tractor. Typically, the tractors used for agriculture are insured under Commercial Misc Class D category and the ones which are used for hauling goods are insured under Commercial GCV category. With the number of tractors produced and sold going incrementally down in the past three financial years, coinciding with two consecutive poor monsoons that hit farm incomes hard, tractor insurance is facing some challenging times. However, with the monsoon this year expected to be good, tractor sales will pick up and consequently new tractor insurance policies will see a fillip. Insurance companies are providing comprehensive tractor insurance policies that are designed to protect risks emanating from the tractor and to the tractor. Some policies are providing protection to all important farming companions such as tractors harvesters, reapers, threshers, chaff cutters, salvage corps vehicle, lawn movers etc., in addition to the personal accident cover to farmer and other family members who may use the vehicle. Plus, No Claim Bonus protection is an attractive benefit that lowers the cost of insurance every time there is a claim-free year. By paying an additional premium, farmers can opt for additional cover for loss of / or damage to electrical accessories and non-electrical accessories and legal liability for farmer's employees if any. Despite tractor insurance offering so many benefits to our kisan-bhai, studies have shown how low levels of awareness on the importance of tractor insurance are posing a major roadblock. This also partly explains why an asset like tractors in India has seen insurance penetration of only 30% in comparison to global benchmark of 85%. Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, Andhra Pradesh (and also Telangana), Haryana, Gujarat, Karnataka, Maharashtra and Tamil Nadu form a bulk of tractor sales. Agricultural accident surveys have time and again showed how in particular years almost one-third of accidents were due to farm machines. Government is doing its bit to boost tractor insurance coverage. Initiatives like Pradhan Mantri Fasal Bima Yojana (PMFBY) will help farmers save on premium cost. Also, it is understood that a Unified Package Insurance Scheme aimed at covering all the insurance needs of the farmers including crop insurance, tractor insurance etc. would be piloted in 45 districts across the country soon. If the results are satisfactory, this initiative can be widened to more areas, thus benefitting a greater populace. With farmers and farm produce being the backbone of our economy, any risk to farmers is in effect a national risk! While insurance companies are working with all stakeholders i.e. farmers, tractor manufacturers and government to design products which address the comprehensive need of insuring mobility vehicles and allied assets such as pump-sets etc., more work needs to be done on this front. The industry’s performance would be influenced significantly by the interplay between various related elements—customers, the individual insurer’s capabilities, other industry participants. Uninsured tractors are the biggest risk for farmers, besides moods of weather. It is with this objective, the distribution and servicing of such policies should be conducted through higher number of Customer Service Centres (CSC) in rural hinterlands. The administrative locations, controlled by the government, can be used at a bigger scale to create awareness and also create a meeting point for buyers-sellers of this must-have insurance. Source - http://auto.economictimes.indiatimes.com