Reducing vulnerability among smallholder farmers through index-based flood insurance in India: equity matters

Agricultural and weather insurance schemes have emerged as a promising tool to protect farmers from the financial losses that result from these flood events, and in helping more generally to reduce the risks of climate variability. Agricultural insurance programs in India are some of the largest in the world, with several running in the country. But many of the poorest in these flood prone regions are unable to successfully benefit from these schemes. Conventional insurance schemes base payments to farmers on estimates of an individual farmers’ loss in yield. In contrast, weather index-based insurance schemes base payments on a weather index which is developed from rainfall data that is in turn linked to farmer yields. The advantage is the reduced cost and time needed to monitor individual farms and hence lower insurance premiums. Innovative use of technology, such as remote sensing, can improve the accuracy and efficiency of index based insurance schemes by estimating flooded areas and crop losses through digital mapping.