Pilot evaluation of the Index Based Flood Insurance in Bihar, India: Lessons of experiences

The Government of Bihar (GOB) with the help of Government of India (GOI) introduced and implemented various crop insurance programs, to provide protection against losses caused by fluctuations in the output of a crop from one year to another or from one crop season to another. Traditional agricultural insurances are designed to make compensation to client farmers affected by various disasters and natural calamities based on individual yield losses or damage to crops and livestock (Ahmed, 2013; Swain and Patnaik, 2016). For developing countries like India, with large numbers of smallholder farmers, measuring such individual losses would incur enormous costs for insurance companies. The index-based insurance offers an alternative in which individual assessment is not necessary. Advances in satellite technology and data analysis were integrated to develop index insurance products, which were piloted in different countries throughout the world such as India, Ethiopia, Senegal, and United States. The index insurance products help minimize the high transaction costs and have the potential to expand the reach of insurance policies to rural areas that were previously considered uninsurable (Swain and Patnaik, 2016; Smith and Watts, 2019). The International Water Management Institute (IWMI) has developed an Index-Based Flood Insurance (IBFI) product integrating hi-tech modeling and satellite imagery (Amarnath and Sikka, 2018; Matheswaran et al. 2019). The product was pilot tested among 200 farmers in six villages of the Gaighat Block of Muzaffarpur District, Bihar during the Khariff season, 2017. This report presents the findings of the IBFI ex-post evaluation undertaken in the pilot areas in Muzaffarpur. The findings of this study provide lessons on how index-based insurance schemes can be made more inclusive, and inform any development of a scheme for future upscaling by IWMI. The findings are based on the qualitative assessment made in April 2018 and a household survey conducted in July 2018.