The Insurance Board (IB), the insurance sector regulator, will soon allow insurers to introduce weather index-based crop insurance policies to provide protection to cultivators against losses inflicted by adverse weather conditions, such as deficit or excess rainfall. The IB is currently laying the groundwork to introduce the scheme in pilot phase in Jumla for apple farming. “If insurance firms intend to introduce similar insurance schemes for other crops, they will be encouraged to do so,” a senior IB official told The Himalayan Times on condition of anonymity. Initially, the IB is planning to allow insurers to sell the policies upon collecting seven per cent of the sum insured as premium per year. This means cultivators will have to pay a fee of seven rupees per year, if the insurance scheme provides protection for losses of up to Rs 100. “However, if policyholders want protection against hailstorm as well, they might be charged one percentage point extra in premium,” said the official. This means annual premium on policy that also covers damage inflicted by hailstorm will stand at eight per cent of the sum insured. Weather index-based crop insurance policy is being introduced for the first time in Nepal considering the vulnerability of Nepali farmers to scant or excess rainfall, as only around 55 per cent of the land suitable for irrigation purpose has so far been irrigated. Also, cultivators encounter other weather-related problems that directly hit agricultural yields. Such shocks often squeeze incomes of many households and even hit the gross domestic product of the country where around 70 per cent of the population still depends on the agriculture sector for livelihood. Considering these risks, the IB had previously allowed insures to sell crop insurance product to all types of farmers, including commercial. But this scheme only covers input cost. This means if crops die early, farmers will get compensation for money that they had spent in purchasing seedlings, fertilisers and other inputs, including labour. “Weather index-based crop insurance schemes, on the other hand, extend compensation based on projected yield of crops,” said the IB official. This means if crops die early, policyholder will be paid based on income that they would generate upon selling the final product. This is one of the reasons why many countries have introduced weather index-based crop insurance schemes to covers losses that could be triggered by adverse weather conditions, such as lack of or excess rain, heat and frost, during cultivation period. These schemes generally provide coverage during the entire life cycle of crop or during fractions of crop life cycle, such as sowing and germination period, flowering period, and pod formation and maturity period. If adverse weather conditions during these periods inflict losses, policyholders can claim for compensation. Simply put, if any crop needs rainfall of, say, 30 mm during sowing and germination period, but actual rainfall exceeds or drops below that level, then policyholders can demand for compensation from insurance companies. In the similar manner, if temperature rises above or falls below certain level and induce losses, policyholders can claim for compensation. To check authenticity of claims filed by policyholders, insurers tap on to weather data of weather stations. “If data provided by farmers and weather stations correlate, policyholders will be paid for losses,” the IB official said, adding, “However, it may not be feasible to launch these schemes throughout the country, as weather stations have not been established everywhere.” Source - thehimalayantimes.com