Crop Insurance in Karnataka

37 Pages Posted: 20 Jul 2005

See all articles by Vijay Kalavakonda

Vijay Kalavakonda

Munich Re

Olivier Mahul

World Bank - Financial Sector Development

Date Written: July 2005


The paper examines the performance of the crop insurance scheme in Karnataka, a southern state of India and the second driest state in the country. The analysis highlights weaknesses in product design, implementation challenges, and operational problems. The finding is that the crop insurance scheme in its current form does not achieve its objectives, either explicit (risk management) or implicit (safety net and containment of both the central and state governments' contingent liability). The crop insurance scheme performs poorly both in terms of coverage (number of hectares insured and number of farmers purchasing insurance) and financial performance. This paper provides a framework for designing a crop insurance scheme based on the premise that insurance is a cost effective risk management technique. The paper also provides some new ideas and thinking toward both improving the existing crop insurance scheme and exploring alternatives to the current product, based on an area-yield approach.

Keywords: Basis risk, crop insurance, risk management, area yield, rainfall insurance

Suggested Citation

Kalavakonda, Vijay and Mahul, Olivier, Crop Insurance in Karnataka (July 2005). World Bank Policy Research Working Paper No. 3654. Available at SSRN:

Vijay Kalavakonda (Contact Author)

Munich Re ( email )

K├Âniginstr. 107
Munich, 80802

Olivier Mahul

World Bank - Financial Sector Development ( email )

Washington, DC 20433
United States

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