Adroit Market Research - Industry Insights

Agricultural insurance is one of the top mechanism which protects agricultural procedures against unpredicted loss of crop profits or yields from produce sales at the market. Agricultural insurance is divided into two major categories such as crop-revenue and crop-yield. Among these, crop-revenue insurance covers estimated revenue from losses due to market fluctuations of crop selling prices. These both types of insurance are a means to help in disaster recovery for producers owing to unexpected events. The crop-yield insurance defends the estimated revenue due to unpredicted yields, which is the size of the crop’s harvest.

Causative factors covered under crop-yield insuranc

Agricultural insurance is one of the top mechanism which protects agricultural procedures against unpredicted loss of crop profits or yields from produce sales at the market. Agricultural insurance is divided into two major categories such as crop-revenue and crop-yield. Among these, crop-revenue insurance covers estimated revenue from losses due to market fluctuations of crop selling prices. These both types of insurance are a means to help in disaster recovery for producers owing to unexpected events. The crop-yield insurance defends the estimated revenue due to unpredicted yields, which is the size of the crop’s harvest.

Causative factors covered under crop-yield insurance may include several natural disasters such as fire, flooding, or drought with the purpose of protecting procedures against crop loss or yield. Crop revenue insurance could cover a producer from unpredicted fluctuations in the selling price resulting from bad publicity, reduced demand, and others. However, technological developments in agri-tech such as precision agriculture have started to transform the crop insurance industry as processes are able to gather data and monitor their crops better than earlier.

In 1938, the US passed the Federal Crop Insurance Act and formed the federal Crop Insurance Program. Primary offerings for crop insurance were so costly for a number of farmers. This resulted in the inability of insurers to refuge losses claimed due to not having built sufficient assets. However, conditions were upgraded with government and insurer Corporation in 1980.

Why is Agricultural Insurance required?

• To help steady farm income, particularly in the period that disaster hits.
• To provide financial support and insurance coverage in the period of natural disasters, pests and diseases.
• To inspire farmers to implement innovative farming practices with better technology.

Features of agricultural insurance

• Crop overspray and straying livestock
• Agreed crop value
• Additional harvest allowance
• Defense from the first appearance through to delivery
• Harvested seed in covered in transit and at the property.
• The deferred expense of premium until the harvest

Understanding agricultural insurance

Agricultural insurance is purchased by several agricultural producers, comprising farmers, ranchers, and many more to protect against either loss of their crops owing to the natural disasters, or the loss of income because of the falling prices of agricultural commodities. Following are major types of agricultural insurance:

1. Multiple Peril Crop Insurance

Multiple peril crop insurance covers crop losses, containing lower yields, affected by natural disasters, such as:

• Drought
• Diseases
• Destructive weather (frost, hail, damaging wind)
• Flooding
• Fire
• Insect damage

Multiple peril crop insurance federally regulated and supported, and is serviced and sold by private-sector agriculture insurance agents and companies. According to the survey, more than 90% of farmers purchase agriculture insurance opt for multiple peril crop insurance. The cost of crop insurance and the total amount of an insurer will pay for crop losses are tied to the cost of the particular crop. MPCI is available for near around 120 different crops, however not all crops are covered in each geographic area. Multiple peril crop insurance policies need to purchase every growing season by deadlines recognized by the federal government and before the crop is planted. It any disaster occurs early enough in the growing season, the policy may comprise incentives to replant or fines for not doing do.

2. Crop-Hail Insurance

In several areas of the world, hail is a recurrent event, farmers often buy crop-hail policies to save high-yielding crops. Such policies are not part of the National Crop Insurance Program; they are vended by private insurer and governed by state insurance departments. A large number of farmers obtains crop-hail coverage as an addition to MPCI. Crop-hail strategies often have a small or even no deductible.

Crop Insurance Claim Procedure

Farmers need to register themselves with the agricultural insurance provides company to initiate with. It is important to register the marketing excess at the sowing of the crop to get crop insurance. The insurance company will then provide a suitable coverage scheme. This coverage scheme comprises market price from the minimum or past support price assurance. The premium for any type of price insurance needs to pay by the farmers. The government will help in the premium payment in the primary stage.

In case of damage: The yield data must be received form the UT/State government according to the authorized cut-off dates. Then the claims will be settled by IA. The individual Nodal Banks will then accept the claim particulars.

In the case of market price decreasing: During the yield period, in case the informed market price fall below a certain price, then the farmer will be rewarded by the insurance company.

Benefits of Agricultural Insurance

• Agricultural insurance assists farmers to maintain the flow of agriculture credit.
• The fact that agricultural insurance will offer financial support in the period of crop failure. It will therefore be a critical instrument in the advancement of crop production.
• Encourage farmers to deploy innovative farming practices and superior technology in agriculture.
• On a larger scale, it is not just a secure farmer who will be profited from agriculture insurance. The whole community will be directly and indirectly benefitted with maintaining employment and production, market fees or generations, taxes etc.
• Agricultural insurance streamlines loss assessment procedures and also aids to build up an appropriate statistical base for crop production.