# **5. Conclusion**

Unlike early pilots, the scaling up of weather index insurance in India has received little attention by academic economists. This paper offers an overview of the market and suggestions for future research and innovations.

First, states may wish to support long-term development of improved products that aim to minimize basis risk. A comparative statistical analysis of different products would be valuable and should be possible in India given the availability of long-term yield and weather data. This could lead to further standardization of products, based on agronomic and statistical principles, which would in turn support robust actuarial design and pricing. In addition to this analysis, the current market structure, under which insurers propose both products and prices, may not offer appropriate incentives to insurers to invest in developing improved products since innovations can be copied by rival insurers. Instead, states may wish to consider tendering in two phases, first with a multipleyear contract to design products and second with a one-season contract to sell products, or to commit to multiple-year contracts with insurance providers.

Second, governments may wish to enhance consumer protection legislation for indexed insurance products, for example, by requiring that any contract states historic burn costs for at least the last ten years. This could help farmers decide whether a particular product is good value, and whether it could be relied on to pay out in bad years.

Third, the WBCIS offers substantial opportunities to understand how to increase demand, particularly from the most vulnerable farmers. A rigorous monitoring and evaluation could be integrated into these programs to ensure that at the end of the pilot period government and states have the information they need to make decisions about the future of agricultural insurance in India.

Fourth, while this paper has focused on weather indexed insurance contracts, there is merit in further research to better understand how best to combine the information from different indices so that farmers can rely on timely claim payments in bad years. For example, an early part-settlement based on a weather index could be combined with a final adjustment based on an area yield index (Rao 2011), with weather and satellite data used behind the scenes by insurance providers to target and monitor the crop cutting experiments that form the basis for the yield index.

Finally, designing, evaluating and regulating indexed insurance products is a highly technical area and there may be a role for a central government Technical Support Unit to provide objective, technical support to states, central government and regulators. At a minimum, such a unit could provide objective analysis of the cost of and level of basis risk in products to assist states in choosing between different programs and insurance providers. However, the unit could also have a broader analytical and research function, with a mandate to study the agricultural insurance market across India and develop best practice guidelines on areas such as product design, procurement and strategies for increasing take-up.

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