Insurance payouts to smallholders
Bihar in northeast India is the state most prone to flooding and it also suffers from droughts. Together, natural disasters cost the state around USD 3 million a year. Over the past three years, IWMI has worked closely with the Indian Council of Agricultural Research (ICAR) to develop the Bundled Solutions of Index Insurance with Climate Information and Seed Systems to manage Agricultural Risks (BICSA) project. BICSA offers rural smallholders a package of insurance against floods and droughts along with improved varieties of seeds that can withstand too much or too little water.
In 2019, in Muzaffarpur district, 269 farm families enrolled in the scheme. Bihar and much of India were flooded that year, but 150 of the affected farmers received a rapid payout totaling USD 10,000. The insurance payout allowed them to repair their homes and replant their crops without getting further into debt.
The pilot scheme specifically indicated that half of the participants should be women. As it turned out, 67 of the 150 households that received a payout were in fact headed by women, who would have otherwise found it difficult to get the resources they need to rebuild their livelihoods. The BICSA project, thus, helps to empower women.
The index-based flood insurance (IBFI) pilot project continued into its third year in 2019. The project has clearly demonstrated that the package it offers promotes climate resilience among the poorest farmers. The Government of India’s countrywide crop insurance scheme, Pradhan Mantri Fasal Bima Yojana, has also shown interest in making IBFI part of its products.
While India has developed good policies for agricultural insurance, this has not been the case in neighboring Bangladesh, which is among the most vulnerable to flooding in the world. An extension of weather index insurance to Sirajganj district that started in 2019 is helping to change attitudes in Bangladesh.
In Bangladesh, as in India, IWMI partnered with local microfinance institutions to educate farmers about crop insurance and to collect premiums, of which 50% was subsidized through the project. When flooding occurred, 750 households, many of them headed by women, shared a total payout of USD 31,500 that was transferred directly to their bank accounts within two weeks. This was the first time that satellite-based insurance had been used in Bangladesh.
Farmers were naturally pleased with the outcome, despite having experienced flood damage, and so too were parliamentarians and government officials. Some called for Bangladesh’s Department of Disaster Management to pay insurance premiums as a way of reducing the suffering of vulnerable people after disasters. The pilot in Bangladesh is now being extended to three additional districts in the northern part of the country.
The Bundled Solutions of Index Insurance with Climate Information and Seed Systems to manage Agricultural Risks (BICSA) project and related work is carried out in collaboration with Weather Risk Management Services Private Limited (WRMS), with support from the CGIAR Research Programs on Climate Change, Agriculture and Food Security (CCAFS) and Water, Land and Ecosystems (WLE), and the Indian Council of Agricultural Research (ICAR). Flood- and drought-tolerant seeds were provided by the Borlaug Institute for South Asia (BISA) and an insurance partner from Reliance General Insurance Company Limited (RGL).