Agriculture is the mainstay of the Indian economy. It provides the principal means of livelihood for over 58.4% of India's population. Agriculture and allied sectors contributed nearly 17.1 per cent of Gross Domestic Product (GDP of India) during 2008-09. Agriculture accounts for about 10 per cent of the total export earnings and provides raw material to a lage number of industry
(Source:http://india.gov.in/sectors/agriculture/index.php & http://india.gov.in/sectors/agriculture/agriculture_overview.php )
Indian farming communities are heavily dependent on weather and suffer high losses year after year due to weather vagaries. This dependency gets further compounded due to lack of irrigation facilities and modern farming techniques. As farmers become unable to pay interest on their crop loans in a drought year and seek to reschedule principal repayments, this impairs access to rural credit as well. Even input companies are not left untouched by weather vagaries. Sudden changes in weather increase the volatility of their business volumes and consequently can even affect the profits of their businesses.
HDFC ERGO offers a comprehensive Weather insurance Policy which is a mechanism for providing effective risk management aid to those individuals and institutions which are likely to be impacted by adverse weather conditions.
Weather based crop insurance is an index-based insurance product designed for crops. This provides security against unpredictable weather conditions faced by farmers. The policy pays when the level of rainfall, temperature or any other parameters increase or decrease around certain predetermined levels as specified in the policy. Weather indices could be deficit/excess rainfall, high/low temperature, extreme fluctuations of temperature, relative humidity and/or a combination of above.
Based on the farmers need, HDFC ERGO’s weather insurance scheme is customized as per crop production and crop cycle stage, need of weather risk, financial protection based on performance of specified index and detailed correlation analysis between crop production risks and weather conditions.
Weather Insurance policy by HDFC ERGO can also be helpful to non agriculture industries like salt production, hydro/wind power generation, solar power production, airlines which are affected by weather related perils. This insurance policy comes with multiple features – customization of insurance product as per business activity/need of weather risk, financial protection based on performance of specified index and detailed correlation analysis between business risk and weather conditions.
These forms of Insurance use a specific parameter of weather in a given area, usually rainfall and temperature, as a proxy for the crop yield of the farmer’s landholding. For e.g. taking rainfall as the parameter, if net rainfall in a given season varies from a pre-determined trigger level, the farmers will be compensated based on variance of the present rainfall from the established level of required rainfall.