Paper

Insurance of Crops in Developing Countries

How to effectively develop crop insurance?
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This publication primarily focuses on risks to arable and horticultural crops and the applicability of insurance to managing these risks. It also discusses some issues concerning forest insurance. The publication serves the following purposes:

  • It provides an introductory overview of crop and forestry insurance;
  • It sets the following boundaries for these types of insurance products:
    • Crop insurance is sold and bought in a market;
    • Insurance has a limited role in risk management in farming;
    • The scope for effective and economic crop insurance can change over time.

The publication makes the following important points:

  • There are two dimensions to the spread of risk:
    • Across an industry or an economy;
    • Through time.
  • Insurance is a business;
  • Premiums must cover several areas of cost in addition to meeting the cost of paying indemnities under policies in force.

The paper discusses:

  • The characteristics of crop insurance, with a special focus on developing countries;
  • The growth in demand for crop insurance products;
  • Different types of crop insurance products;
  • Steps in the development process of crop insurance, which include assessing:
    • Demand;
    • The nature of the insured parties;
    • The main risks;
    • The types of crops that can be insured;
    • Loss issues.
  • Insurance administration, including:
    • Marketing;
    • Setting indemnity and premium levels;
    • Collecting premiums;
    • Handling claims.

The publication concludes by setting out the roles that the government and private sector can play in this area.