Weather Insurance Opening new frontiers in India: Weather Insurance Opening new frontiers in India BASIX Insurance Meet Hyderabad, 21 Oct 2005


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


Rural Non-Life Insurance – Need: Rural Non-Life Insurance – Need


Importance of Agriculture: Importance of Agriculture India sustains 16% of the world’s population on 2.4% of land resource Agriculture contributes 24% of the Indian GDP Livelihood support to two-thirds of the population Employment to 57% of work force Single largest private sector occupation Raw material source to large number of industries like (textiles, silk, sugar, rice, flour mills, milk products) Any change in this sector has a multiplier effect on the economy


Agriculture in India: Agriculture in India High dependence on weather 40% of net sown area irrigated, 60% dependent on rains Most irrigation from non-perennial sources Affects adoption of improved crop production techniques because of high risks and low margins Dwindling ground water resources Farmer at the mercy of rains


Risks in Agriculture: Risks in Agriculture Production Risks Out put Risks


Responses: Responses


Responses…: Responses… Issues with crop insurance Highly subsidized : premiums and claims High loss ratios High administration costs Claims assessment not transparent Lengthy claims settlement cycle Low acceptance amongst farmers; Less than 10% of the farmers avail of crop insurance


Responses… Global: Responses… Global


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


Rainfall is the biggest factor in determining a good crop: Rainfall is the biggest factor in determining a good crop It needs to be distributed properly If it is not timely, the sowing cant happen / seeds will rot or the plants will not grow in time / maturity does not take place It needs to be enough If it is not enough, in case of a drought, then the plants will not grow well All this has an impact on yield, and one could do nothing about it!


Crop Calendar and Water Requirement: Crop Calendar and Water Requirement


Slide14: 40-50mm 50-60mm 150-170mm 160-170mm 40mm Water requirement Stages Time Output


Crop Calendar and Rainfall pattern: Crop Calendar and Rainfall pattern


Slide16: 11-24Jun 25Jun-15Jul 16Jul-26Aug 27Aug-7Oct 8Oct-11Nov Presowing Seedling Vegetative Reproductive Maturity 2 wks 3 wks 6 wks 6 wks 5.5 wks 40-50mm 50-60mm 150-170mm 160-170mm 40mm Water requirement Stages Time Output


Deviation in rainfall and impact on yield: Deviation in rainfall and impact on yield


Slide18: 11-24Jun 25Jun-15Jul 16Jul-26Aug 27Aug-7Oct 8Oct-11Nov Presowing Seedling Vegetative Reproductive Maturity 2 wks 3 wks 6 wks 6 wks 5.5 wks 40-50mm 50-60mm 150-170mm 160-170mm 40mm 170mm Loss in yield Water requirement Stages Time Output


Deviation in rainfall and impact on yield: Deviation in rainfall and impact on yield


Slide20: 11-24Jun 25Jun-15Jul 16Jul-26Aug 27Aug-7Oct 8Oct-11Nov Presowing Seedling Vegetative Reproductive Maturity 2 wks 3 wks 6 wks 6 wks 5.5 wks 40-50mm 50-60mm 150-170mm 160-170mm 40mm 170mm Loss in yield Water requirement Stages Time Output


Deviation in rainfall and risk management through Weather Insurance: Deviation in rainfall and risk management through Weather Insurance


Slide22: 11-24Jun 25Jun-15Jul 16Jul-26Aug 27Aug-7Oct 8Oct-11Nov Presowing Seedling Vegetative Reproductive Maturity 2 wks 3 wks 6 wks 6 wks 5.5 wks 40-50mm 50-60mm 150-170mm 160-170mm 40mm 170mm Rs.1,600 /- per acre Payout by ICICI Lombard Water requirement Stages Time Output


Our Initiative in Weather Insurance: Our Initiative in Weather Insurance


Delivery channels: Delivery channels


Slide25: CRMG TA begins ICICI Lombard insures Basix portfolio with CRMG TA. Govt of Rajasthan becomes first government to support a WIn initiative. ICICI Lombard launches first direct retail campaign for Orange growers.


Growth… contd: Growth… contd


Growth… contd: Growth… contd


Growth… contd: Growth… contd


Business share – Channel wise: Business share – Channel wise


Case Studies: Case Studies


Case Studies: Crop Specific: Case Studies: Crop Specific


4 mn tonne wheat lost to high temperature: 4 mn tonne wheat lost to high temperature Wednesday, September 8, 2004 (New Delhi) India lost a mammoth 4 million tonnes of wheat output due to high temperature during a critical cultivation phase earlier this year, a comprehensive study by a premier farm-research arm of the government has revealed. "Having scrutinized the various reasons which can be assigned to such decline in production, the main and single factor which can be indicated more precisely is high temperature during the critical stage of grain filling phase of wheat plant" Project Director, Directorate of Wheat Research (DWR) Jag Shoran told reporters. PTI


Slide33: Wheat cultivation in India is a gamble of temperature. Howard, British Scientist at PUSA Early 20th Century


Wheat solution: Wheat solution


Apples: Apples


Oranges: Oranges


Coriander: Coriander


Paddy: Paddy


Generic: Generic


Salt production: Salt production


Brick Kiln: Brick Kiln


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


“Weather Insurance” Over “Yield Insurance”: “Weather Insurance” Over “Yield Insurance” Source of loss can be clearly identified as an “act of god” as opposed to an “act of bad management”* * Skees, 1999


Preferred Risk Management Program: Preferred Risk Management Program


Weather Insurance … Transparent and Simple: Weather Insurance … Transparent and Simple


Weather Insurance … Fair: Weather Insurance … Fair Weather Insurance for Oranges in Jhalawar


Weather Insurance … Predictable: Weather Insurance … Predictable Weather Insurance for Oranges in Jhalawar


Weather Insurance … consistent: Weather Insurance … consistent Minimum human involvement Consistent measurement technology


Weather Insurance … Wide Choice: Weather Insurance … Wide Choice Deficit Rainfall Excess Rainfall Rainfall Events Complete crop cycle coverage Select crop phase coverage Temperature


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


Success factors: Success factors Internal - Modeling - Basis Risk - Data management - Turn-around-times and quality of service External - Subsidy - Stakeholder consensus - Access to distribution network of RFIs - Access to reinsurance capital


Challenges: Past Experience Price Farmer Farmer Government Government support is crucial Challenges


Product Characteristics: Product Characteristics Geographically Specific Expensive High Initial Fixed Costs Politically Sensitive Turnkey Solutions Subsidy Long term commitment Stakeholder Consensus


Product Characteristics: Product Characteristics Basis Risk Reinsurance capital Apparatus intensification Move to treaty arrangements


The right team: ICICI Lombard TEAM CRMG IARI The right team Reinsurance


Stakeholder Engagement: Stakeholder Engagement GOVERNMENTS/ THEIR AGENCIES Peril Identification Product Design Product Endorsement Subsidy CHANNEL Enrollment & training Commercial Contracts CLIENTS Peril Identification Product Design Communication MULTILATERALS Technical Assistance to Governments for scaling up


Recapitulation: Recapitulation Initiatives Rationale Success Factors Future view


Traditional View of Agriculture & Rural Business: Traditional View of Agriculture & Rural Business Product Innovation High Distribution & Administration Cost Regulatory Obligation


……. ICICI Group’s View of Agriculture & Rural Business: ……. ICICI Group’s View of Agriculture & Rural Business Creative Distribution Product Innovation


Partnership with Basix: Partnership with Basix Our Endeavour: Being a preferred partner of Basix in servicing all the 1 Lakh farmers that Basix is striving to cover.


Slide61: Thank You