Crop Insurance as a Risk Management Strategy in Bangladesh

Premium : IRRI/BORO @ 3% per season of 120 days
AUS @ 4% per season of 120 days
AMAN @ 5% per season of 120 days
WHEAT @ 3% per season of 120 days
JUTE @ 3% per season of 120 days
Perils covered : Flood, Cyclone, Hailstorm, Windstorm, Drought, Plant Disease,
Pest and Insects.
Attachment of Risk : Risk attaches from the time of plantation / sowing subject to the
growth of 75% of the plants.
Some other conditions were as follows;
- crops were insured against variation in yield, not prices
- insurance covered 80% of the expected value of production
- premium rate was uniform throughout the country for a particular crop
- Holding of an individual was treated as an unit of insurance; and
- Taking insurance policy was voluntary
Operation of the program
A Crop and Cattle Insurance Department has been established at the head office of the SBC
in Dhaka which has been entrusted with the responsibility and authority to execute the
programme. Crop Insurance policies could be taken by two groups of farmers – those
belonging to agricultural cooperative societies under BRDB and individual farmers taking
loans from commercial banks and BKB. The SBC official reported that the majority of policy
holders were from cooperative societies.
Insurance premium was determined on the basis of information on area of crop, expected
production, expected price, and rate of premium. The information on area in crop was
provided by the farmer, rate of premium was fixed and expected price was usually the
government procurement rate. The expected production per acre was determined by a team
consisting of the manager of cooperative society, the extension officer and the upzilla officer
of BRDB / the manager of credit giving bank.
After necessary forms were filled up, they were sent to the local office of the SBC which in
turn used to send them to the crop insurance wing of the head office. Other than this, the local
office has no other involvement in the process. They did not even keep the record of
insurance holders. In case of crop damage, policy holders had to directly correspond with the
head office of the SBC which used to estimate the extent of crop damage and settle the
payment of claims. The assessment of loss is made by a consensus of opinions of the
representatives of the Insurer, the insured, loan giving agency and the agriculture department
after an ocular view of the affected crop land. The difference between the actual and the
expected yield form the basis of the claim. An excess of 10% is imposed in all cases. The
whole insurance period is divided into six equal stages of investment values determining
maximum loss at each stage as under:
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