India seem to moving ahead as one of the most advanced regions of the world implementing crop weather insurance schemes. For a long time now there have been index based weather insurance schemes available to rural farmers through microfinance schemes, these schemes work well (most of the time), but assessing claims is proving difficult due to moral hazard.
Now Iffco Tokio General Insurance is planning to bring technology to bear on the issue and is piloting a scheme to use satellite data to help assess settlement of any claims. With the assistance of the International Labour Organisation (ILO), Iffco Tokio is using NASA satellite imagery to work out the Normalized Vegetation Difference Index (NVDI), the difference in green cover over specified areas over specified time. This can be accurate down to areas of 250 square meters (about field size) and allows the insurer to really assess whether there has been a crop loss or not. Rainfall and temperature variations are also taken into consideration. You can read more about NVDI in NASA’s Earth Observatory here.
It’s good to see technology being utilised here as the only way these microinsurance schemes can succeed is if they are fair both for the policyholders and the insurers, that means a standardised, non-biased way to measure claims is required which technology can provide. Iffco Tokio are known for innovating with technology, they’re currently piloting putting RFID chips into cattle in an attempt to prevent farmers passing off uninsured animals as ones that are covered.