ICICI Lombard General Insurance, in association with the government of Rajasthan, has launched a comprehensive weather insurance product for farmers growing oranges.
The farmers would be compensated for the losses due to deficit rainfall. ICICI Lombard is the first insurance company in the country to get the approval from the Insurance Regulatory Authority of India to launch weather-linked insurance products.
"Weather insurance does not suffer from the usual moral hazard and adverse selection and high administrative costs of traditional crop insurance, and it is therefore better suited even to small farmers in rainfall-dependent countries such as India," said Sandeep Bakhshi, chief executive officer and managing director, ICICI Lombard.
Orange cultivation is subject to two principal weather perils -- unavailability of shower for initiation of flowering and dry spell during the flowering period.
Further, orange trees require an effective shower of at least 60 mm of rainfall on any three consecutive days to initiate flowering. The weather insurance will be effective from June 15 to July 30, 2004.
Orange trees are vulnerable to dry spells during the flowering period. A dry spell of 10-15 days can lead to flower drop and consequent yield loss. The most critical period is thus July to September.
The cover for this peril would start from July 1 and last till September 28.