Agriculture Insurance

Agriculture insurance covers the policyholder in case the crops should be damaged or destroyed by a natural disaster, such as flooding or draught. 

Experiences with crop insurance in developing countries, and even in developed countries, have had various results:

• In the 70's and 80’s, many governments set up crop insurance programmes to improve the farmers’ capacity to pay back the loans granted by agricultural development banks.  These programmes covered credit payments and, occasionally, additional income for the farmers whose production was already below the fixed threshold. 
• These programmes were launched in quite different countries such as Brazil, India, the Philippines and the United States; in all countries the results involved budget deficits because the charges (administrative charges and compensations) were higher than the revenues.  Causes for crop insurance failure included: the programme’s weakness, the (general) covariant risk typical to agricultures that are highly dependent on rainfalls, and in some cases, natural disasters. 
• Parametric or index-based insurance covering the loss of yield due to a random variable that can be easily observed and tightly linked to the yield of the insured specific crop (rainfalls, temperature, etc.) are currently being tested in Malawi, India, Mongolia, and may be a favourable perspective. 

Source: Text based on Dossier thématique Micro-assurance ©2007, www.lamicrofinance.org