Context

Exposure to weather hazards, pests, crop diseases, and climate change threaten the livelihoods of many smallholder farmers in low- and middle-income countries. A lack of agricultural insurance has severe financial consequences for farmers in the aftermath of shocks; however, even in uneventful years, it discourages risk-averse farmers from investing in profitable agricultural production opportunities, thereby limiting the adoption of practices and technologies that would improve productivity and income.

Farmers in Haryana, a state in northern India, have limited access to instruments for managing agricultural production risks. Although they have access to the Pradhan Mantri Fasal Bima Yojana scheme, which provides subsidized insurance coverage for major crops across India, its coverage is incomplete. Since it relies on area-yield, index-based insurance, with claims settlements based on average yields measured through crop-cutting experiments in a predefined area, farmers do not receive payouts based on their individual losses. Moreover, the cost and logistical challenges around conducting crop-cutting experiments across the country result in long delays in assessing claims and issuing payouts, depriving farmers of additional income when it is most needed. Finally, the scheme provides insurance coverage only for major crops and does not cover farmers for damage to commercial crops grown at a smaller scale.

To overcome these challenges, Housing Development Financial Corporation Ergo General Insurance, together with researchers from the International Food Policy Research Institute and the Borlaug Institute for South Asia, designed a picture-based insurance (PBI) solution that uses smartphone photographs of insured crops to identify damage and settle claims. PBI aims to bring out the best of both indemnity-based and index-based insurance by offering a new way of managing risk.  

Evidence

The evaluation found that uptake has been moderate, with approximately 22 per cent of eligible farmers agreeing to participate and submit images of their crops in exchange for free insurance or cash incentives. The moderate uptake is arguably related to several key implementation challenges, including a slow build-up of farmer rapport over time, difficulties in gathering sensitive enrolment documents from farmers, a relatively low number of PBI payouts, and substantial delays in disbursing them. The study found large effects of the intervention on insurance uptake and perceptions of insurance, as well as small effects on investments in the extensive margin (i.e., types of crops produced, acreage, and the number of seasons over which target crops are produced). However, very limited or no effects on investments were found in the intensive margin (i.e., input usage) or other agricultural, economic, and well-being outcomes. The authors believe these findings have separate implications for the private and public sectors.

The findings suggest that PBI is a useful innovation for the private sector (particularly for insurers) to provide more tangible and trusted insurance coverage to farmers and increase demand for their services. However, the limited impact on agricultural outcomes or household well-being suggests that there is little justification for using public funds to foster private-sector efforts to incorporate PBI into their product portfolios. Instead, many of the challenges faced in implementing this impact evaluation point to a need for investment in digital infrastructure, particularly for the poor and marginalized, in order to create a more enabling environment in which insurers can provide PBI and other commercial solutions in an economically viable way. 

Evidence impacts

Suggested citation

Ceballos, Francisco, Pushkar Gaur, Monali Gupta, Samyuktha Kannan, and Berber Kramer. 2024. A randomized controlled trial evaluating the impacts of using smartphone camera data for claims verification in India. 3ie Impact Evaluation Report 141. New Delhi: International Initiative for Impact Evaluation (3ie).