Excutive Summery: AGRICULTURE INSURANCE: A Study On Oriental Insurance Company

AGRICULTURE INSURANCE: A Study On Oriental Insurance company
EXCUTIVE SUMMERY
AGRICULTURE INSURANCE, as a risk transfer device, plays a

significant role in supporting the economy. The role of agriculture
insurance for a country like India can never be underplayed.
Traditionally, agriculture remains the backbone of the Indian
economy. The Indian business cycle is influenced by the crop patterns
that mainly depend on the vagaries of nature. Every flood or drought has
its own impact on Indian economy, and the GDP growth is influenced by
the farm yields.
Agriculture Crop insurance is risk management tool that farmers
can depend on as an instrument of indemnity in the event of crop failure.
Farmers encounter a plethora of natural disasters like rains, floods,
droughts, pest and disease. Besides these “acts of Gods”, farmers also
encounter perils and risks due to the economy policies pursued by the
Government. Risks like the price for the agricultural produce and the
monsoon are two major factors on which the agriculturalist has absolutely
no control. A new phenomenon is the destruction of crops due to social
disturbances and communal feuds.
The present study covers in general on risk in agriculture,
agriculture insurance, policies available in agricultural insurance. This
project (study) is also on oriental insurance company, insurance policies
on agriculture, available for farmers are specifically covered. At the end
of this project few recommendations have been given with conclusions.
LALA LAJPAT RAI COLLEGE Page 1

INTRODUCTION TO AGRICULTURE
Agriculture (a term which encompasses farming) is the process

of producing food, feed, fiber, fuel and other goods by the systematic
raising of plants and animals.
Agri is from Latin ager, meaning "a field", and culture is from
Latin cultura, meaning "cultivation" in the strict sense of tillage of the
soil. A literal reading of the English word yields: tillage of the soil of a
field. In modern usage, the word Agriculture covers all activities essential
to food/feed/fiber production, including all techniques for raising and
processing livestock. Agriculture is also short for the study of the practice
of agriculture—more formally known as agricultural science.
The history of agriculture is a major element of human history,

and agricultural progress has been a crucial factor in worldwide social
change, including the specialization of human activity: when farmers
became capable of producing food beyond the needs of their own
families, others in the tribe or nation or empire were freed to devote
themselves to something other than food acquisition. 42% of the world's
laborers are employed in agriculture, making it by far the most common
occupation. However, agricultural production accounts for less than 5%
of the Gross World Product (an aggregate of all Gross Domestic
Products).
Agriculture remains a dominant sector in a large number of

developing countries and has always been a risky business. Unlike the
industrial sector it is subject to the vagaries of nature.

Uncertainty of crop yield is thus one of the basic risks every

farmer has to face in developing countries. In most of these countries,
majority of farmers are poor with extremely limited means and resources
and are therefore unable to bear the risks of crop failure. It is true that
much of the present uncertainty of crop production in these countries
could be removed by adopting technical measures like:
 Assured irrigation and judicious use of land
 Crop rotation, mixed cropping
 Improvements in marketing and institutional set up.
The co-variability of risks however reduces the effectiveness of
traditional measures. Which is why, the modern insurance sector can play
a major role in considerably strengthening the financial security of
farmers.
Agriculture is considered as the key point of all strategies for
planned socio-economic development of a country. Rapid growth of
agriculture is essential not only for achieving self-reliance at the national
level but also to bring household food security and equity in income
distribution. This is aimed at reducing the poverty levels of any country.
Agricultural insurance assumes wider significance in India where
the majority of the population depends on agriculture for it’s lively
existence. A significant portion of the Indian industries that contribute to
the country’s foreign exchange earnings is also dependent on agriculture.
The agricultural prosperity of a country depends on three basic resources
namely land, water and electricity.
Any adversity in these resources will result in heavy losses for

the farming community. As a major portion of the farming community

lacks adequate financial stability, any damages to the crop, cattle or any
other equipment used by them is a matter of serious concern. Agricultural
insurance business originated as a panacea for this suffering. Among
agricultural insurance products, crop is considered as the most important
category. Other types include cattle, poultry, equipments used for
agriculture, etc.
General Insurance Corporation initiated the crop insurance

schemes in India. The national crop insurance scheme aims at
encouraging the farming community in the country. The policy covers
farmers against the loss of crops. The ultimate success of the crop
insurance scheme depends on the farmer’s cooperation towards this. The
farmers who depend on poultry, sheep, goat, pig, camel, etc. are covered
under specific policies designed for the purpose.
RISKS IN AGRICULTURE
Risk is an important aspect of the farming business. The uncertainties of

weather, yields, prices, government policies, global markets, and other
factors can cause wide swings in farm income. Risk management
involves choosing among alternatives that reduce the financial efforts of
such uncertainties. Five general types of risk are identified. They are:

1. Production risk derives from the uncertain natural growth
processes of crops and livestock, weather, disease, pests and other

factors affect both the quantity & quality of commodities
produced.
2. Price or market risk refers to uncertainty about the prices
producers will receive for commodities or the prices they must pay
for inputs. The nature of price risk varies significantly from
commodity to commodity.
3. Financial risk results when the farm business borrows money &
creates an obligation to repay debt. Rising interest rates, the

prospect of loans being called by lenders, and restricted credit
availability are also aspects of financial risk.
4. Institutional risk results from uncertainties rounding government
actions, Tax laws, regulations for chemical use, rules for animal
waste disposal, and the level of price or income support payments
are examples of government decisions that can have a major
impact on the business.
5. Human or personal risk refers to factors such as problems with
human health or personal relationships that can affect the farm

business. Accidents, illness, death, & divorce are examples of
personal crises that can threaten a farm business.
Thus, although agriculture in India is constitutionally the

responsibility of the states rather than the central Govt., the latter plays at
key role in formulating policy & providing financial resources for
agriculture.

RESEARCH METHODOLOGY
For the purpose of present study both primary & secondary data were
used. The primary data collected by Insurance Company visits &
interviewing with staff members of Oriental Insurance Company.
Secondary data is collected from Books, Periodicals, Internet, Magazines,
and Newspapers etc.
OBJECTIVE OF THE STUDY
The following are the objective of the present study:-
1. To study in detail the Agricultural Insurance.
2. To study on various schemes for getting Agriculture Insurance.
3. To study about the advantages of Agricultural Insurance.

4. To know about the different types of Agricultural Insurance
policies & criteria.

HISTORY OF AGRICULTURAL INSURANCE
In India, the efforts to introduce an efficient crop insurance

policy were initiated way back in 1950. Then the government of India
drafted a crop insurance bill and a model pilot scheme to be implemented
by the state governments. But most of the state governments were not in
favor of the bill & thus the initiative failed. General insurance department
of the Life Insurance Corporation of India launched the first ever crop
insurance scheme by an insurance company in 1972. Cotton was the only
crop selected to be covered under the policy. General Insurance
Corporation of India later administered this policy after nationalization of
general insurance.
GIC introduced several related schemes during this period but
all these schemes were discontinued later due to various reasons. In 1978-
79, GIC introduces a new policy called ‘Pilot crop insurance scheme
which was withdrawn later & a countrywide scheme called
‘Comprehensive crop insurance scheme’ was introduced. It suffered from
many deficiencies & limitations like:
• It provided coverage only to a limited number of crops- Wheat,
paddy, millets, pulses & oil seeds.
• The coverage was restricted only to rain fed crops because the
scheme was not effective among the progressive farmers of states
like Punjab, Haryana & Western UP.
• The scheme covered only the loaned farmers & the sum insured
was limited to a maximum amount of Rs. 10,000 taken as credit
from financial institutions.

• The scheme was implemented barely in 18% of total cropped area

in the country with the compensation having no direct relationship
to the actual losses incurred.
Crop insurance is purchased by agricultural producers,

including farmers, racers, & others to protect themselves against either
the loss of their crops due to natural disasters, such as hail, drought, and
floods, or the loss of revenue due to declines in the prices of agricultural
commodities. The two general categories of crop insurance are called
crop-yield insurance & crop revenue insurance.
NEED
Human beings don’t like changes and neither can they deal with
them very well. They become more despondent when it comes to facing
uncertain climatic changes or disasters. Uncertain climatic condition
during recent times has left many farmers poor & crippled, further
leading to self-annihilation. However, with quick and early precautionary
measures, farmers can easily avoid such catastrophe. These lifesaving
measures should start with taking agricultural Insurance, which brings
about a huge difference in the relief & rehabilitation of the affected
farmers.
The Indian economy entirely depends upon the well being of
farmers. Therefore, the need of the hour is to encourage each of them to
adopt agricultural insurance & avail it’s benefits. But the main sources of
rural credit in India have been the institutional sources such as banks,
cooperatives & then other professional and individual sources such as
moneylenders, traders, friends & relatives. These credit sources are used
for working capital or for investment whereas loans to help tide over bad
times are not still officially offered by institutional lenders. At the most,
these institutions reschedule the loans against any loss of crops, but
doesn’t specifically reschedule against any untoward risk.
MOTIVATION
In a country like India with 70% of the population in rural areas,

agriculture is not an occupation but is a way of life. It is the main
propeller of the nation’s economy, contributing nearly a third of the
country’s gross domestic product & sustaining more than half of the
country’s work force.
Agriculture in our country consists of a wide spectrum
extending from well- irrigated cultivation to purely rain-fed cultivation,
which is aptly described as ‘ a gamble in the monsoons’. While some
areas have bumper crop production, other areas suffer from drought or
floods. There is a need to bring a modicum of stability into the life of the
farmers who constitute the bulk of our country. Further, frequent failures
of crops especially in rain-fed, drought/flood prone areas & the inability
of the farmers to absorb the risk instability in production levels as well as
price fluctuations are resulting in poor levels of investments, affecting the
economic viability of financial institutions.
Agriculture insurance is one way of not only providing a
positive & stabilizing influence on agriculture production and
productivity but also reducing the risk of loan default. A financially
viable crop insurance scheme that should be acceptable to all sections of
farming community was, therefore, the need of the hour.

BENEFITS
Where affordable insurance is not available, poor households

typically survive less severe situations through informal coping strategies
(such as drawing down savings, asset sale, reciprocal exchanges,
diversifying crops, non farm income). However, informal mechanisms
often result in inefficient outcomes and unexploited market opportunities,
because the fear of risk leads farmers to forgo potentially profitable
production choices. As well, these systems tend to break down in the face
of catastrophes because of the correlated nature of such disasters
Insurance acts as a guarantee for investment and can serve as a

form of collateral, allowing farmers access to credit services, investment
opportunities, and protection from mild and severe shocks. Compensating
for catastrophic income losses protects the consumption and debt
repayment capacity and helps mobilize rural credit at reduced costs.
Furthermore, improved ability to manage risk disproportionately benefits
the poor.

STRATEGIES FOR AGRICULTURE RISK MANAGEMENT
Farmers have many options for managing the risks they face, and most
producers use a combination of strategies and tools. Some strategies deal
with only one kind of risk, while others address multiple risks. Following
are some of the more widely used strategies:-
 Enterprise diversification assumes incomes from different crop &
livestock activities do not move up and down in perfect correlation, so
that low income from some activities would likely be offset by higher
income from others.
 Financial leverage refers to the use of borrowed funds to help
finance the farm business. Higher levels of debt, relative to net worth,
are generally considered riskier. The optimal amount of leverage
depends on several factors, including farm profitability, the cost of
credit, tolerance for risk, and the degree of uncertainty in income.
 Vertical integration generally decreases risk associated with the

quantity & quality of inputs or outputs because the vertically
integrated firms retains ownership or control of a commodity across
two or more phase of production & marketing.
 Hedging uses futures or options contracts to reduce the risk of

adverse price changes prior to an anticipated cash sale or purchase of a
commodity.
 Household off-farm employment or investment can provide a more

certain income stream to the farm household to supplement the
income from the farming operation.

FOCUS ON AGRICULTURAL ISSUES
 Suicides by Farmers:
A farmer’s risk can be segregated into two types, one being

systematic risk that is more to do with weather risk & the other risk that
differs with each farmers. The insurance covers the systematic risk &
takes no responsibility of individual or idiosyncratic risk. It’s been
observed that the traditional financial institutions fail to cope with such
risks and the farmers are left to face it on their own. Thus, the absence of
credit forces farmers to depend on input dealers for credit which is
informal in it’s nature.
Limited access to formal credit, low quality of pesticides & other inputs
& crash in market prices along with uncertain monsoon are certain risk
factors for which the farmers are not covered. The modern insurance
sector can play a major role & considerably strengthen the financial
security of the farmers.
Thus, agricultural insurance is an effective instrument, & with

an efficient institutionalized mechanism, the relief efforts to the farmer’s
losses can be streamlined. It’s an instrument that enhances crop
production as well as provides financial supports to the farmers in an
event of crop failure. It further reduces direct & indirect costs on the
national economy.

 Insurance Initial Stage :
In India, only 60% farmers are actually aware of agricultural

insurance out of which only 35% actually avail such policies. In most of
the cases, the policies are taken out of compulsion & not because of its
benefits. These farmers come to know about the insurance through an
informal method of loan & financial institutions.
This means that it’s hard to find a non- loaner farmer who
would insure his crop, as they are either unaware of agriculture insurance
or they don’t know it’s exact benefits. To attract farmers, the insurance
sector should promote low premiums & cover their poverty. The
insurance sector also needs to design customized products & develop its
infrastructure and distribution systems to cater to the needs of the most
remote agricultural areas. Above all, providers should educate the rural
population about the enormous benefits of agricultural insurance & how
to get best out of any scheme and also how to secure their financial
position.
The enhancement of agricultural insurance makes more sense

particularly in India as agriculture still contributes 25% of the GDP, thus
any minute change would have & an adverse effect on the economy.
Even the target of achieving 9% plus economic growth is heavily
dependent on agricultural growth & this is possible only when the risk
involved is properly covered.

 Government Role :
Government not only act as a facilitator but also encourages the

overall development in rural agriculture of the country.
Thus, by establishing strong agricultural insurance platform, it
invariably build a strong & vibrant economy, in the absence of which, the
people have to bear each & every adverse event that in turn affects their
economic, social & financial status, and in the end it also affects the
entire economy of the country.
The importance of agriculture insurance lies not only in
preventing the loss of farmers, but also to avail collateral & incidental
benefits through insurance services. Further, the government should
channelize the public funds received as premiums into more productive
avenues so that people inculcate the habit of saving. Therefore, for the
overall development of the country, it’s the duty of the government to
promote agricultural insurance as 60 to 65% of the population in India
still depends upon agriculture for their livelihood.

KEY ELEMENTS CONCERNING AGRICULTURAL

INSURANCE
This section deals with all those key elements that influence the
working of any scheme that is concerned with agricultural insurance.
They are:
 Coverage of Farms or Farmers:
The farm activities apart from horticulture also include

aquaculture farms, poultry farms and orchards. Even though these
sections have access to traditional institutional finance, they have
tremendous scope for the insurance sector too.
Thus, public/ private insurance has equal opportunity to operate on a
viable basis. In India, most of the farmers have small holdings who
employ family labor and produce primarily for self- consumption. They
represent the traditional & subsistence section.
For example, it reveals that there are few states such as
Maharashtra & Andhra Pradesh where the farmers who are covered well
even avail the insurance benefits well.
However, states like Bihar & Tamil Nadu which have enormous
fertile lands & who are equally prone to seasonal variation are less
covered and further the benefit reached to the farmers is also minimal.
For other states too the government should put considerable efforts to
increase the number of farmers covered and make sure that the concerned
also received the benefits.

 Improving Insurance Coverage:
The need for agriculture insurance is more than urban areas &
also those from the farmers are less aware of related information and
schemes. The study conducted by All India Mitigation Institute reveals
that there are various factors that need to be considered for improving
crop insurance in India. It is represented in following chart.
9% 18%
12%
1%
13% 17%
11% 14% 5%
Cover more crops
Individual Assesment
Gram Panchayat as a unit of assessment
Reduce premium
Quick settlement of claims
Insurance service at your doorstep/at village level
Making scheme voluntary
CCE's be conducted in presence of villagers
Not applicable
 Proper Assessment of Sum Insured & Loss:

The assessment of the insurance amount or the loss incurred is
the toughest job in the agricultural insurance.
In most of the schemes, the sum insured is based on the cost of
production and a part of the value yielded or the overall production loan
or crop loan. However, there are few problems faced by the evaluators

such as, whether the cost should include the variable cost or fixed cost.
Apart from these evaluators, nature & application in relation to the risks
insured are also important for determining the loss.
 Effective Resolution of Premium:

Another key element in the agricultural insurance is the
determination of premium.
Apart from covering the pure risk, insurance premium may also
be segregated on the basis of net or gross cover. In this, the net premium
covers average losses over a period, whereas gross premium includes cost
of administration as well as rational return or profit.
An effort should be made to make premium rate low for the
farmers who can’t even afford the pure risks also.
BENEFITS OF SCHEME TO THE FARMING

COMMUNITY
The schemes offer various benefits like:-

1. Efficient tool of agricultural development in the field of crop
production & to provide financial support to the farmers in the
event of crop failure.
2. Encourage farmers to adopt progressive farming practices &
higher technology in agriculture.
3. Help in maintaining flow of agricultural credit.
4. Provide significant benefits to both the insured farmers as well as
the entire community directly & indirectly by maintaining
production, employment, etc.
5. Streamline loss assessment procedures & help in building up huge
& accurate statistical base for crop production.

A STUDY ON ORIENTAL INSURANCE COMPANY
A PROFILE
A wholly owned subsidiary of the Oriental Government Security Life
Assurance Company Ltd, the Oriental Insurance Company Limited was
incorporated on 12th September 1947, in Bombay city of India (now
Mumbai). The main aim behind the establishment of the company was to
indulge in the business of General Insurance. It became a subsidiary of
Life Insurance Corporation of India in 1956 and continued to serve as
such till 1973 (when the General Insurance Business in India was
nationalized).
In 2002, after the passage of the Insurance Amendment Bill, Oriental

Insurance Company was de-linked from General Insurance Corporation
(GIC) of India. The following year, all the shares of the company that had
been held by GIC were transferred to the Central Government. With time,
Oriental Insurance emerged as one of the leading insurance providers in
the country. Today, it has diversified into the various fields of insurance,

so as to cater to the needs of the urban as well as rural population of

India. From the modest premium of Rs.99,946 in 1950, the company has
grown to achieve a premium of Rs. 4020 crores (2006-07).
Present Scenario
The Oriental Insurance Company Limited boasts of as many as 23
Regional Offices in India, with its head office in the capital city of New
Delhi. Apart from that, there are over 900 Operating Offices of the
insurance company, in various cities of the country. It is also involved in
overseas operation, mainly in three countries - Nepal, Kuwait and Dubai.
Oriental Insurance Company boasts of technically qualified, competent
and dedicated workforce of 16,000 employees, always eager to cater to
the needs of the customers.
Oriental Insurance Company Ltd was incorporated at Bombay on 12th

September 1947. The Company was a wholly owned subsidiary of the
Oriental Government Security Life Assurance Company Ltd and was
formed to carry out General Insurance business. The Company was a
subsidiary of Life Insurance Corporation of India from 1956 to 1973 ( till
the General Insurance Business was nationalized in the country). In 2003
all shares of our company held by the General Insurance Corporation of
India has been transferred to Central Government.
The Company is a pioneer in laying down systems for smooth and

orderly conduct of the business. The strength of the company lies in its
highly trained and motivated work force that covers various disciplines
and has vast expertise. Oriental specializes in devising special covers for
large projects like power plants, petrochemical, steel and chemical plants.
The company has developed various types of insurance covers to cater to
the needs of both the urban and rural population of India. The Company
has a highly technically qualified and competent team of professionals to
render the best customer service.
Oriental Insurance made a modest beginning with a first year premium of

Rs.99,946 in 1950. The goal of the Company was “Service to clients” and
achievement thereof was helped by the strong traditions built up overtime
ORIENTAL with its head Office at New Delhi has 26 Regional Offices
and nearly 900+ operating Offices in various cities of the country. The
Company has overseas operations in Nepal, Kuwait and Dubai. The
Company has a total strength of around 15,000+ employees. From less
than a lakh at inception, the Gross Premium went up to Rs.58 crores in
1973 and during 2008-09 the figure stood at a mammoth Rs. 4077.90
crores.
According to the company, OICL was the first to issue following

policies:-
o Have underwritten the biggest Grass Root Refinery Project, Reliance
Jamnager refinery.
o Have issued a package policy under mega risk to PSU Oil giants.
o Have issued advance Loss of profits policy in India.
o Have issued directors & Officers liability policy in India.
o Introduce Kidnap & Ransom cover in India.
o Have issued Stockbrokers & stock exchange custodial services policy
in India.

o Have issued tailor-made cover for Cellular communication systems.

o Have front office computerization drive in India.
o Have a system of in-house loss assessment up to statutory limits.
o Have started motor third party conciliatory proceedings.
MISSION STATEMENT
To contribute to the socio economic objectives of the nation by

being a vibrant and viable organization catering to the growing insurance
needs of the community. Towards this end we will strive for effective
management of business operations.
OBJECTIVES
 To serve better the insurance needs of the entire community, keeping

customer as the focus.
 To strengthen our tradition of being customer - friendly, in order to

provide quality service.
 To manage Business profitably, manage funds judiciously and deploy

invertible funds for optimum yield.
 To optimize the retention of Indian business and conduct reinsurance

and international operations in the best interest of the country.
 To work towards minimization of losses and develop risk

Management Technologies.

 To function as a strong and dynamic non-life insurer.
PROFIT AT A GLANCE FOR LAST THIRTY YEARS
The Company’s Gross Direct Premium Income in India during the year
2008-09 (Audited) was Rs.3964.26 crores and the Premium Income outside
India was Rs.113.64 crores. The Gross Direct Premium in India & abroad
showed a growth of 4.55%. The Net Premium Income (Domestic and
Foreign), on the other hand grew by 12.38% from Rs. 2878.67 crores in
2007-.08 ?to Rs. 3235.10 crores in 2008-09.
The company’s operations in Nepal, Dubai and Kuwait yielded a Gross

Direct Premium of Rs. 113.64 crores during the year 2008-09 as against
Rs. 92.07 crores during the previous year. The net premium on foreign
operations stood at Rs. 111.26 crores as against this, the Net Incurred
Claims during this year in respect of foreign operations were Rs.65.95

crores at 59.27%. The foreign operations have resulted in an overall surplus

of Rs. 15.27 crores.
After taking into account the income from Interest, Dividend & Rent of Rs
608.23 crores and Profit on sale of Investments of Rs 387.39, we have
posted a pre-tax loss of Rs 82.66 crores & post-tax loss of Rs. 52.66 crores
for the year 2008-09.
As against the desirable Solvency Margin of 1.5 mandated by the Indian
regulatory body, IRDA, the available Solvency Margin is 1.66 as at 31st
March 2009.
The Company had a documents issuance ratio of more than 98% during the
year, having issued 96.55 lacs documents approximately. The claims
disposal ratio for non-suit claims settlement ratio was 86.30%.
The Company is not only, IT friendly, But also Technology Savvy. We

have our own website in place. An integrated Non-Life Insurance
Application Software (INLIAS) has been implemented in all the 1018
offices. This will ensure that our Customer Service parameters grow by
leaps and bounds.
No wonder, The Oriental Insurance Company has been enjoying the

highest rating from leading Indian credit rating agencies CRISIL and
ICRA. The Company has also been rated as B++ (Very Good by AM Best,
an international rating agency.

CUSTOMER CARE – THE ORIENTAL TRADITION
At Oriental, it is always ‘customer first’. They strictly follow

the motto of being ‘Customer friendly- as an Oriental tradition’.
However, an organization issuing 82 lakhs policies and settling nearly 6
lakhs claims in a year cannot avoid facing grievances from its customers.
During 2003-04, the Document issuance ratio of their company

stood at 98.4% and the Non-Suit Claim settlement ratio was at 80.02%. A
commendable achievement indeed!
All customers, including those whose cases do not fall under the
purview of the Ombudsman can approach the District/ State and National
Consumer Dispute Redresser Forums. Besides all these, insurance
policies and claims there under fall under the jurisdiction of Civil Courts
of appropriate jurisdiction.
Application Software (INLIAS) is under implementation and is

expected to be in place shortly. This will ensure that our Customer
Service parameters grow by leaps and bounds. No wonder, The Oriental
Insurance Company has been enjoying the highest rating from leading
Indian credit rating agencies CRISIL and ICRA. The Company has also
been rated as B++ (Very Good) by AM Best, an international rating
agency. The Company is not only “IT friendly” but also “Technology
Savvy”.

AGRICULTURAL POLICIES
Agriculture insurance is one way of not only providing a positive and

stabilizing influence on agricultural production and productivity but also
reducing the risk of loan default. A financially viable agricultural
insurance scheme that should be acceptable to all sections of farming
community was, therefore, the need of the hour.
• Animal Driven Cart / Tonga Insurance

• Apple Insurance (Input) Policy
• Aquaculture (Shrimp/Prawn) Insurance Policy
• Beetlevine Insurance (Input Policy)
• Coconut Palm Insurance Policy
• Failed Well Insurance
• Honey Bee Insurance Scheme
• Insurance of Biogas Plant (Gobargas)
• Khalihan Insurance Package Policy
• Kissan Package Insurance
• Plantation/HortiCulture (Input) Policy
• Policy for Kisan Agricultural Pumpset Insurance
Scheme
• Rose Plantation Insurance
• Tea Plantation Insurance

KISSAN
PACKAGE
POLICY
ANIMAL
SERICULT-
DRIVEN
URE
CART/
SILKWORMI
TONGA
NSURANCE
INSURANCE
INSURANCE KISSAN
HORTICUL- POLICY AGRICULT-
TURE
URE
INSURANCE
PUMPSET
INSURANCE
KHALIHAN KISSAN
INSURANCE CREDIT
PACKAGE CARD
POLICY (PAIS)

KISSAN PACKAGE POLICY
This policy contains 15 sections including tariff and market agreement

sections, which will comprehensively satisfy probable insurance needs of
different categories of farmers. Section 1a & b covering Fire and allied
perils and burglary and house breaking is compulsory and the farmer has
to opt for minimum 3 sections. If farmer opts for more than 4 and upto 6
sections a discount of 15% on non-tariff, non-market agreement premium
is available. For more than 6 and upto 8 sections, 20% discount is
available as above. For more than 8 section 25% discount as above is
available. The 15sections are as under:
Section 1 – Building and Contents

This section has 2 sub sections:
1a. Fire and allied perils, terrorism cover to building and contents
1b. Burglary and house breaking for contents excluding
money and valuables.
Section 2 – Stock of farm produce

This provides indemnity to damages to the stock of farm produce against
fire and allied perils, however unprocessed grains kept in field
immediately after harvesting for post harvest operations is covered as per
Khalihan Bima Policy.

Section 3 – Television set

This provides cover for loss to the television apparatus and insured
premises by fire and allied perils, burglary, house breaking, theft,
accident or electrical breakdown, legal liability upto 25,000/-, damage to
insured property caused by breakage of antenna fitting for a limit upto
Rs.3,000/-
Section 4 – Pedal cycle/Cycle rickshaw

This provides indemnity against damage to cycle rickshaw due to
accident, third party legal liability to driver, passengers and property. It
also provides personal accident cover for rickshaw owner and family on
additional premium.
Section 5- Personal Accident Insurance

This section provides cover against death and permanent disablement
both partial and total arising out of accident as per JPA or Gramin policy.
Section 6 – Insurance of artisans village/cottage industry

Tiny sectors including bio-gas. This provides indemnity against the loss
of or damage to the building contents structure by fire and allied perils.
The original investment in equipment and machinery should not exceed
Rs.5.00 lacs and the total value at risk including building and machinery,
stock and stock in process should not exceed Rs.10.00 lacs.
Section 7 – Cattle & Livestock Insurance

Under this insurance, animals are covered against death due to diseases or
accident (including fire/lightning/famine/flood cyclone) surgical
operation, strike, riot, civil commotions risk. As per our cattle/livestock
Insurance policy.

Section 8 – Kissan Agricultural Pumpset

This insurance covers both centrifugal (electrical/diesel) and submersible
pumpsets upto 25 H.P. against loss or damage due to fire and lightning,
theft/burglary (due to violent forcible entry provided the pumpset is kept
in locked enclosure), mechanical/electrical breakdown, RSMD and
terrorism, as per our Kisan Agricultural Pumpset Insurance Policy.
Section 9 – Poultry/Duck Insurance

This cover is available to the Poultry/Duck farm owned by the farmers.
This insurance covers all types of exotic and cross breed poultry birds
and ducks against death due to accident (including fire, lightning, famine,
riot and strike and civil commotion) or diseases as per our Poultry
Insurance
Policy.
Section 10 – Baggage Insurance

This insurance indemnifies the insured against loss of or damage to
accompanies baggage by accident or misfortune (lost or destroyed) whilst
the insured is traveling anywhere in India.
Section 11- Animal Driven Cart Insurance

This insurance covers carts, tongas and coaches drawn by buffaloes,
bulls, bullocks, horse, mule, donkeys and camels and also the animals
pulling it. T.P. liability and death, disablement of the driver as per
Animal driven cart Insurance policy.

Section 12 – Honey Bee Insurance

This section will provide insurance protection to Beehives and bee
colonies against loss/damage as a result of an accident (Basic cover),
which includes fire, flood, inundation, storm, tempest, cyclone, hurricane
and tornado. This may however be extended to cover loss/damage during
transit, due to theft, specified diseases namely Thaisac and Iridovirus and
also pesticide poisoning from crops foraged by Honeybees on payment of
stipulated additional premium. Premium rates other terms and conditions
will be as per our Honeybee Insurance Policy.
Section 13 – Gun Insurance

This section is intended to cover loss of or damage to the guns, belonging
to the insured from any cause (including the bursting of Barrels except
while undergoing test and excluding wear and tear) upto an amount not
exceeding the declared value. Third party property and third party
personal injury liabilities both together shall be limited to rs.10,000/- any
one accident any one year
Section 14 – Medical hospitalization expenses excluding domiciliary

hospitalization
This scheme provides compensation for the expenses incurred in
hospitalization subject to limits of sum insured.
Section 15 – Agricultural Tractor Insurance

This indemnifies the insured against loss to the agricultural tractors and
or its accessories by fire, explosion, self ignition, lightening, burglary,
house breaking, theft, riot and strike, earthquake, fire and shock, flood
and inundation, typhoon, hurricane, storm, tempest, cyclone, hailstorm,
frost, landslide, rockslide, accident, malicious act, terrorism, whilst in
transit by road, rail and inland waterways. It also includes third party
liabilities as per Motor Vehicle Act 1988. Premium rate to be charged is
as per Indian Motor Tariff.
ANIMAL DRIVEN CART/TONGA INSURANCE
1. Scope of cover:
This cover is divided into four sections:
Section 1 – Loss or damage to the cart/tonga/coach whilst in transit by
road rail or inland waterways by accidental external means, fire,
explosion, lightning, storm, tempest, flood, inundation, earthquake,
burglary or theft, malicious damage, riot and strike.
Section 2 – This section provides indemnity against death or permanent
total disablement of the animal used for pulling or driving the carriage
due to accident caused whilst attached to the cart/tonga/coach.
Section 3 – Third party liability caused by cart/tonga/coach insured
including passengers liability upto Rs. 5000/- per accident and Rs.
10,000/- for all accidents in a year with certain standard exclusions.
Section 4 – This section indemnifies the driver against death or loss of
sight of two eyes or loss of use of two hands or loss of use of two feet or
loss of sight of one eye & loss of Rs. 10,000/- and loss of use of one
hand/foot or loss of sight of one eye – Rs.5000/-
2. Sum insured:
Sum insured depends on the market value is 100% of the market value of
cart/Tonga/Animal and animals to be used for driving are Male buffalo,
bullock, castracted bullock, mule donkey, camel, and yak.

3. Underwriting Consideration:
• Proposal where no financial institution is interested should be

avoided.
• Accidental damage cover to the carriage older than 5 years should
not be granted.
• The Sec. I & II are compulsory cover. However, if the animal is
insured for the purpose of pulling or driving the carriage by a
separate policy, the cart/ tonga/coach alone can be insured keeping
on the record the particulars of the animals insured.
• In case of normal cover offered by the policy, no veterinary
examination is required.
• The animal should be identified by ear-tagging or branding with hot
iron or tattooing as per cattle insurance market agreement.
4. Premium rates
• In case of slow moving animals (i.e bulls, bullocks, camels,

donkeys) & If tonga/cart/coach is to be insured alone. – A basic
premium of Rs. 25/- plus 1% 0n the estimated value of both animal
& vehicle.
• In case of fast moving animals ( i.e Horses, mules) – A basic
premium of Rs. 30/- plus 1% on the estimated value.
• Section III – a flat premium of Rs.5/-.
• Section IV – A flat premium of Rs. 3/-.
• For extension of Sec. II – 2% extra on the value of the animal per
year.

KISSAN AGRICULTURAL PUMPSET INSURANCE
1. Applicability:
The policy applies to centrifugal pumpsets (Electrical & Diesel) and
submersible pumpsets upto 25 H.P. capacity used for Agricultural
purposes only. Pumps with higher capacity i.e. more than 25 H.P. should
be insured with Engineering Department.
2. Scope of cover:
Cover is granted against fire or/and lightning, theft/burglary, (due to
violent forcible entry and provided the pumpset is kept in a locked
enclosure), mechanical/electric breakdown, riot, strike, malicious
damage, terrorism.
Flood risk can be covered by payment of additional premium.
3. Rate of premium:
Sum insured is 100% market value. Premium is calculated for standard
cover is 1% of S.I. & flood cover (optimal) is 0.5% of S.I.
Premium will be loaded by 50% for pumpsets, which are more than 10
years old.
Discount is applicable only as per policy schedule. Excess is 1% of sum
insured subject to a minimum of RS. On each every claim.
4. Exclusions:
a. Normal wear & tear, gradual deterioration due to atmospheric
conditions or otherwise.
b. Willful act or gross negligence of insured or his representatives.

c. Loss or damages for which the manufacturer or supplier of property
is responsible either by law or under contract.
5. Rewinding charges:
These are payable after deducting salvage value of the burnt copper plus
deductible excess. It is payable under the policy should not exceed 15%
of the sum insured.
6. Claim Procedure:
On the happening of loss or damage, the insured shall forthwith give
notice to Insurance Co. Thereafter, on receiving claim form, repairs bills,
claims will be processed.
Survey may not be conducted in all cases. Co’s. should not normally
insist on surveys for pumps with less than 15 HPs. Capacity unless they
have reasons to do otherwise.
AGENCY COMMISSION – 15%

KISSAN CREDIT CARD – PAIS
Scope of cover:
This is a personal Accident Insurance Master policy covering all the
Kisan Credit Card holders. This will include the holders of KCC issued
by the District Co-op. Banks, RRBs and commercial Banks throughout
India.
This scheme will cover all the KCC holders against death or permanent
disability resulting from accidents caused by external, violent & visible
means and occurring within the geographical jurisdiction of India.
1. Persons Covered:
This policy will cover the KCC holders up to the age of 70 years and
whose names are declared by the banks in respect of whom the premium
is paid by the banks to the Insurance company.
2. Risk Coverage:
The benefits under the scheme are as under:

a. Death to accident (within 12 months of the accident) caused by
outward, violent & visible means – RS.50,000/-.
b. Permanent total disability – RS. 50,000/-.
c. Loss of two limbs or two eyes or one limb & one eye and in case of
loss of one limb or one eye –RS. 25,000.

3. Period Of Master Policy:
This policy shall remain valid for a period of three years effective from
April 2001 & any modification/alteration shall be made at the end of
years after review of the premium and claim experience. If the claim
experience exceeds 70%, the premium shall be suitable loaded.
4. Rate Of Premium:
The policy can be issued for one year or three years period by charging
RS.15/- for annual policy & RS.45/- for three years period. Service tax is
waived for this policy. The participating banks will pay premium to
designated insurance company on Flagship company basis.

KHALIHAN INSURANCE PACKAGE POLICY
Applicability:
This package policy provides cover to unprocessed grains kept in

Khalihan awaiting processing, animal driven cart without animals and
thrasher operator. The cover is available under three sections:-
Section A – Unprocessed grain in Khalihan against Fire, termites, riot,
strike and malicious damage.
Section B – Animal Driven cart (without animal) in Khalihan against fire,
riot, strike, malicious damage.
Section C – Person operating thresher in Khalihan against personal
accident (as per Gramin personal accident cover).
1. Sum Insured & Excess:
The policy is subject to certain special exclusions and excess clause. The
sum insured is restricted to RS. 45,000/- for Section A, RS. 5000/- for
Section B and RS. 10,000/- for per Khalihan per farmers.
Excess is Rs.2500/- per event. This excess shall not apply to section C.
2. Rate Of Premium:
RS.100/- (Nett) including service tax.

3. Claim Procedure:
 Immediate intimation of the loss.

 Submission of duly filled in claim from alongwith following:
 Report of fire Authorities
 A certificate from Patwari of the village certifying that
the insured is the owner of the land where the crop is grown.
 For personal Accident claims, medical report & in the event of
death post Marten report, police report, panchnama etc.
4. Special Exclusions:
This package insurance does not cover

 Grass, fodder, stew, husk etc. will not a part of insured crop. Only
foodgrain shall be considered as insured.
 Loss by theft during or after the occurance of any insured peril

except as provided for in the riot, strike & malicious damage clause.
 Loss or damage to properly occasioned by it’s own undergoing any

heating or drying or fermentation process.
 Loss or damage occasioned by or through consequence of the

burning of property by order of any public authority.

SERICULTURE (SILKWORM) INSURANCE
A. MULBERY SILKWORM CROP INSURANCE
1. Applicability:
The scheme is applicable to univoltine/bivoltine/multivoltine/pure or
hybrid races of mulberry silkworm crops reared by the sericulturists as
declared by the farmers/ department/ agency.
2. Policy Cover:
Cover starts from the egg stage to cocoon are harvested. Policy covered
perils are fire, lightening, flood, inundation, storm, tempest, earthquake,
landslide, rockslide, impact by rail / road/ air craft. The insurance will
also cover diseases like Grasserie, Flacherie, Mascardine, pebrine and
attack of uzifly subject to the exclusions given in the policy.
3. Sum Insured:
Sum insured is equivalent to the cost of input and premium is different
for each crop. Identification is done according to lot no. date of
preparation of seed & date of hatching.
4. Rate of Premium:
The net rate of premium will be as follows on the maximum sum insured
for each crop. (For all the 3 or 5 crops raised in a year should be paid in
advance).
Bivoltine – 8%, Cross Bred – 7%.

5. Claim Procedure:
The policy issued cover input costs & does not include profits. On the
occurrence of any accident or disease or pest immediate notice in writing
& completed the duly claim form, cumulative assessment certificate from
the competent authority certifying the cause of death of silkworm & value
of cocoons at the time of loss should be submitted along with vouchers,
bills cash memos etc. within 7 days from the date of sale of cocoon,
failing which the claim is treated as no claim.
B. TASAR SILKWORM CROP INSURANCE

Tasar sericulture acclaimed as a poor man’s forest based avocation is
practiced out doors only. As such worms are exposed to the vagaries of
climatic conditions and there is a little control on climatic condition by
the rearer.
Tasar silkworms rearing period varies from crop to crop i.e. 30 days to
60days and yield also varies. Silent feature of scheme are as under:-
1. Applicability:
Scheme is applicable to Tasar / oak Tasar. Age group from egg stage to
cocoon stage i.e. from the time eggs purchased by the farmers / LRC till
cocoons harvested.
2. Policy Cover:
Policy covered perils are fire, lightening, flood, inundation, storm,

tempest, earthquake, landslide, rockslide, impact by rail / road/ air crafts.
3. Sum Insured & Pattern Of Compensation:
The sum insured is equivalent to the cost of inputs namely dfls, warms,
leaves, labor, chemical etc. is arrived at on actual at on the cost of inputs.
The compensation is always made after deducting the amount realized by
sale of the cocoons from the total sum insured. That means amount which
falls short of sum insured is compensated.
4. Rate Of Premium:
Premium rate is 10% of the maximum sum insured.

Since rearing is done in forest, the rearers are always prone to accident.
hence personal accident cover against accidental death, PTD etc. as per
JPA/ Gramin accident policy may be offered.

PLANTATION/ HORTICULTURE INSURANCE
1. Scope Of Cover:
This policy can be issued to cover Horticultural crops (grapes,
citrus orange lime & sweet lime), Chickoo, Pomegranate, Banana,
Vanilla, Areca nut and cocoa.
Plantation crops e.g. Rubber, Eucalyptus, Poplar, Teakwood
Sugarcane and Safed Musli. Subject matter of coverage is fruits in respect
of crops listed in horticultural crops & trees in respect of plantation crops
and shoot in case of sugarcane. The indemnities are provided only on
input cost basis.
2. Period Of Insurance:
The period of insurance is crop duration of 12 months

whichever is shorter however period of insurance in respect of sugarcane
is extendable by such period beyond 12 months upto a maximum of 18
months as may be necessitated by the varieties. In respect of rubber,
poplar, eucalyptus, and teakwood where plants are first required to be
raised in nurseries and then fields the period of insurance shall commence
after expiry of 12 months from transplanting (nurseries are not covered).
3. Policy Cover:
The perils covered are fire and allied perils including riot, strike
and terrorism. This is standard cover. Optimal cover is also available for
unseasonable rains and frost in case of grape vines only on additional
premium.
4. Sum Insured:
Sum insured shall be based on the cost of cultivation I.e. input
cost or cost of raising/ development of insured trees whichever terms is
applicable depending on the crop which is insured.
5. Rate Of Premium:
Premium shall be charged for different insurable crops at the following
rates:
i. Horticultural Crops -
Grape (standard cover) – 5% of sum insured Grape (optimal cover) –
Additional 1.50% of sum Insured.
ii. Plantations -
Sugarcane – 1.25% of sum insured
Other plants – 1.25% of sum insured.
2. Excess:
The insured shall be deemed to be his own insurer for first 20%
of the claim assessed per acre that is to say; only 80% of loss assessed
shall be paid under the policy.

RECOMMENDATIONS
• Need to create awareness on schemes at village panchayats.
• Schemes need to be made popular at the small village level.
• Agriculture insurance should be available for share croppers also

role of banks should be farmer friendly and need of active their
participation.
• Payment of compensation amount should be made in shorter time.
• Agriculture Insurance Agent should be deputed.

CONCLUSION
Agricultural sector occupies a key position in the Indian

economy. It provides employment to about 65 per cent of the working
population of India. Around one-quarter of India's national income
originates from this sector. Agricultural products like cereals (mainly
rice), tea, coffee, cashew, spices, tobacco and leather are important items
of India's exports and hence foreign exchange earnings.
The present work traces the developments in Indian agriculture

during the post-independence period, explains the key reform measures
undertaken for the development of agriculture in the wake of economic
liberalization and examines current issues pertaining to this vital sector of
the Indian economy.
Risk management is of crucial importance of the investment and

financing decisions of farmers in developing countries and in transition
economies. Agricultural insurance, although one of the most often quoted
tools for risk management, can only play a limited role in managing the
risks related with farming. The applicability of insurance in any given
situation is based on consideration of whether it is a cost-effective means
of addressing a given risk. The acid test of developing and operating an
insurance programme to complement other risk management measures
depends on the cost/benefit ratio – to the farmer and to the potential
insurance providers.

An important ray of hope in this complex changing scenario of

agriculture is that a new generation of farmers who are more educated,
young and energetic should take up this enterprise. In addition, many
non-farming community entrepreneurs should also be enticed towards
agriculture.
There are no two opinions on the importance and the brighter

prospects for agricultural insurance market in India. However, for the
significant growth of agricultural insurance, its penetration must be
increased. Such type of insurance is even more important in India as
two-thirds of the farmers here still depend upon the seasonal factors for
their earnings. Thus, to make the most out of this sector, the central
government should set up insurance companies’ right from block level
such as Mandal, District, and to State level for encouraging farmers to
insure themselves from the risk involved in the agricultural sector.
Further to increase the significance of agricultural insurance, the

income generated in this sector should be controlled by the central
government and then invested in equity market and Mutual Funds that
would also give the farmers a fixed monthly return. Like many other
countries, India should also market its insurance products by linking it
with credit, as this helps to keep the administration expense low. Finally
the approach of the approach of any agricultural insurance products
should be simple in its design and presentation so that they can be easily
understood.

BIBLIOGRAPHY
BOOK SOURCES:
 Narayanan, H. (2008). Indian Insurance-A profile. Delhi: JAICO.

PP.438-456.
 Mishra, M.N., & Mishra, S.B. (2008). Insurance- Principles and

Practice. New Delhi: S.Chand. PP. 364-380
 Trivedi, P.R. and Singh, U.K. (Eds.). (2008). Encyclopaedia of

Insurance Business and Management. V.7, P.1813
ELECTRONIC SOURCES:
 http://www.orientalinsurance.org.in/portal/dt
 http://www.iloveindia.com/finance/insurance/companies/oriental-
insurance.html
 http://www.economywatch.com/indianeconomy/agriculture-
insurance-india.html

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AGRICULTURE INSURANCE: A Study On Oriental Insurance company

AGRICULTURE INSURANCE, as a risk transfer device, plays a

LALA LAJPAT RAI COLLEGE Page 1

Agriculture (a term which encompasses farming) is the process

The history of agriculture is a major element of human history,

Agriculture remains a dominant sector in a large number of

LALA LAJPAT RAI COLLEGE Page 2

Uncertainty of crop yield is thus one of the basic risks every

Any adversity in these resources will result in heavy losses for

LALA LAJPAT RAI COLLEGE Page 3

General Insurance Corporation initiated the crop insurance

Risk is an important aspect of the farming business. The uncertainties of

LALA LAJPAT RAI COLLEGE Page 4

1. Production risk derives from the uncertain natural growth

processes of crops and livestock, weather, disease, pests and other

creates an obligation to repay debt. Rising interest rates, the

human health or personal relationships that can affect the farm

Thus, although agriculture in India is constitutionally the

LALA LAJPAT RAI COLLEGE Page 5

OBJECTIVE OF THE STUDY

The following are the objective of the present study:-

1. To study in detail the Agricultural Insurance.

2. To study on various schemes for getting Agriculture Insurance.

3. To study about the advantages of Agricultural Insurance.

policies & criteria.

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HISTORY OF AGRICULTURAL INSURANCE

In India, the efforts to introduce an efficient crop insurance

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• The scheme was implemented barely in 18% of total cropped area

Crop insurance is purchased by agricultural producers,

In a country like India with 70% of the population in rural areas,

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Where affordable insurance is not available, poor households

Insurance acts as a guarantee for investment and can serve as a

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STRATEGIES FOR AGRICULTURE RISK MANAGEMENT

 Vertical integration generally decreases risk associated with the

 Hedging uses futures or options contracts to reduce the risk of

 Household off-farm employment or investment can provide a more

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FOCUS ON AGRICULTURAL ISSUES

A farmer’s risk can be segregated into two types, one being

Thus, agricultural insurance is an effective instrument, & with

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 Insurance Initial Stage :

In India, only 60% farmers are actually aware of agricultural

The enhancement of agricultural insurance makes more sense

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Government not only act as a facilitator but also encourages the

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KEY ELEMENTS CONCERNING AGRICULTURAL

 Coverage of Farms or Farmers:

The farm activities apart from horticulture also include

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 Improving Insurance Coverage:

 Proper Assessment of Sum Insured & Loss:

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 Effective Resolution of Premium:

BENEFITS OF SCHEME TO THE FARMING

The schemes offer various benefits like:-

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