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It is probably one of the most innovative, yet transparent and easy-to-administer, insurance products designed for farmers.

Covering about 80 lakh farmers, the Sankat Haran Bima Yojana (SBY) of Iffco-Tokio General Insurance Company (ITGI) is now entering its tenth year of operation. What makes the scheme unique is its simple design, linking accident insurance to fertiliser purchases.

A farmer buying a 50 kg bag of fertiliser from the Indian Farmers Fertiliser Cooperative (Iffco) - which owns 74 per cent of ITGI - is automatically insured for an amount of Rs 4,000. This insurance is provided free of cost, as the premium of Re 1 for every bag is fully borne by Iffco. The sum insured goes up the more the number of bags the farmer buys, subject to a maximum of Rs 1 lakh, corresponding to 25 bags. The policy is effective for only 12 months from the date of purchase of the bag.

As regards coverage, SBY provides Rs 4,000 (a bag) for death caused by accident, Rs 2,000 towards permanent total disablement and loss of two limbs or vision in both eyes, and Rs 1,000 in the event of loss of any one limb or vision in one eye.

The scheme, moreover, involves no major documentation; even cash receipt against fertiliser purchase is treated as evidence for making insurance claims. Since September 2001, ITGI has disbursed claims totalling about Rs 60 crore to almost 10,000 farmers under the SBY.

SBY a branding tactic

For Iffco - which markets 11 million tonnes or 22 crore bags of fertilisers annually - SBY has been a means to consolidate its brand positioning among farmers. For ITGI, ,,it has been the best advertisement for spreading the message of insurance among rural customers," says Mr S. Narayanan, Managing Director and CEO, adding ,,we have sought to piggyback on its goodwill to launch other products for the same market".

These include a cattle insurance scheme, Pashudhan Bima Yojana (PBY), and two weather-related products, Barish Bima Yojana (BBY) and Mausam Bima Yojana (MBY).

The PBY has pioneered the use of Radio Frequency Identification (RFID) chips for livestock identification, as against the normal brass/plastic tags that lend themselves easily to fraudulent claims.

RFID systems - which transmit the identity of an object in the form of a unique sequence of numbers or letters - enable exact animal identification through automatic capture of data even from a long range. RFID tags also facilitate better herd management, as it is possible to feed and track data pertaining to artificial insemination, pregnancy testing, calving or vaccination of every individual animal in large dairy farms.

ITGI has so far insured approximately 4,000 heads of cattle under the PBY. The scheme charges a premium rate between 3 and 5 per cent of the sum insured of the animal, which is fixed at a maximum of Rs 30,000.

The BBY, which is a rainfall index-based insurance scheme for kharif crops, covered 69,502 farmers during 2009-10, while meeting claims in 16,198 cases. The MBY is a more recent scheme for providing risk cover against temperature, humidity and rainfall aberrations in respect of rabi crops.

While both schemes rely on historical weather data from the India Meteorological Department, the product designs vary according to both region and crop. ,,For example, if it is paddy grown in a rainfed area, the rainfall deficiency trigger would start from 20 per cent below the normal average for that area. The trigger would be 40 per cent below normal for paddy in irrigated conditions," explained Mr Narayanan.

Likewise, a farmer in Coimbatore growing jowar (a relatively sturdy crop) may have to pay a premium of only 4.5 per cent of the sum insured. The same would go up to 7.5 per cent if he raises cotton, which is a more sensitive crop.

Source - Business Line