Agriculture and allied activities are the primary source of livelihood for almost 65 % of the Indian population. Although initiatives like land reforms, Green Revolution, institutional credit, etc. have mitigated many problems pertaining to the sector, timely availability of water is the paramount factor affecting agricultural production. Harnessing of water from rivers through irrigation is one of the solutions to this problem. However, only one-third of the total cropland has been brought under irrigation till now thus rendering a large portion of Indian agriculture dependant on monsoon.

On the other hand, monsoons are getting more and more precarious. Rainfall trends are fast changing. The distribution of rainfall is getting uneven. Thus while we witness floods in many areas many other areas suffer from severe drought, the same year. In monsoon 2005, while rains played havoc in cities like Vadodara, Mumbai and Bangalore, the North-East regions suffered a deficiency of 20 % from the Long Period Average (LPA) rainfall. This increasing variability (positive as well negative) of rainfall from the LPA exposes the population dependant on agriculture to a serious livelihood risk and disturbs the already skewed risk-return equation of agriculture.

Crop insurance, as a risk transfer tool has been in vogue for quite some time. Despite the scale achieved over the years certain inherent characteristics of crop insurance like the limited application to notified areas and crops, yield based coverage, fixation of insurance unit at sub-divisional level, difficulties in loss assessment, etc. has left crop insurance far from becoming a complete risk management solution, especially for small farmers.

Finally we now have rainfall insurance product that offers protection against deficit as well as excess rainfall. Claim triggers are based on the observed rainfall index and not actual yield, thus ensuring transparency in claim payouts. This also eliminates the problem of moral hazard and adverse selection. Payouts based on actual rainfall ensure timely indemnification.

In furtherance of its mission to provide social protection and security to SEWA members against various risks, SEWA has initiated Rainfall Insurance in association with ICICI Lombard General Insurance Company Ltd. The pilot project in collaboration with Centre for Micro-Finance Research (CMFR) has been launched in Ahmedabad, Anand and Patan districts for the monsoon season 2006. Almost 1000 policies have been sold. In order to customize indemnity for various stages of a crop cycle, the product has been broken into three phases to match the sowing, growing and harvesting stages. Deficit rainfall is covered in the first two phases while excess rainfall is covered in the third phase. Separate triggers have been fixed for each phase to fine-tune the product. Farmers in Ahmedabad and Anand have the option of high as well as low rainfall products, depending upon the water requirement of their crops. The product is available to landless labourers as well, whose livelihoods also depend heavily on monsoon.

In the coming years, it will be the endeavour of SEWA to learn from the experience and improve upon the existing products with a view to make them more affordable and useful for the members.