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 Indian Journal of Finance and Banking; Vol. 3, No. 2; 2019 
  ISSN 2574-6081   E-ISSN 2574-609X 

Research Article                                          Published by Centre for Research on Islamic Banking & Finance and Business, USA 

 

     10 
 

A Study on Effectiveness of the Crop Insurance in Karnataka -With Special 
Reference Chikmagalur District 

 
 

Hamsini H.P 

Final Year Student 
Ramaiah University of Applied Sciences 

Bangalore-560054, India 
E-mail: hamsinigowda13@gmail.com 

 
 

Rashmi.R 

Professor 
Faculty of Management and Commerce 
Ramaiah University of Applied Sciences 

Bangalore-560 054, India 
E-mail: rashmi.co.mc@msruas.ac.in 

 
 
Abstract  
Indian agriculture activities are severely dependent on rainfall that occurs in monsoon year. The behavior of the monsoon is 
unusual that cause natural disasters like lack of rainfall or floods, cyclones, etc.  Majority of the cropped area is affected by 
drought. About 12 million hectors of the agricultural land is affected by the calamities and this land does not have irrigation 
facility. Crop insurance is a tool to protect  the farmers  from  financial loss as a result of crop loss out of nearly all natural 
factors past their manage consisting of weather,  natural calamities , floods, pests, illnesses etc. There is a need for the crop 
insurance to protect the farmers against the financial loss due to crop loss. There are various schemes under crop insurance which 
aim to provide financial support to farmers. This is the motivation behind the study. The research is carried out to understand 
the effectiveness of crop insurance. A sample of 348 Farmers was considered to collect opinions through a structured 
questionnaire in Chikmaglur district, Karnataka. The factors under the study were Awareness, Financial security, income 
stability, Loan repayment towards the future acceptance of crop insurance    
 
Keywords: Crop insurance, Awareness, Financial security, income stability, Loan repayment, Future acceptance                                           
 
1. Introduction 
Crop insurance is one of the several types of insurance which are provided to the farmers. This coverage is given to the 
agriculturists and farmers. This Crop coverage policy has been given since the time of Kharif 1985.Insurance gives economic 
help for loss control in agriculture. This coverage provide protection scheme for the farmers whose vegetation get damaged at 
some point of natural disaster.  

The loss is suffered because of natural calamities is given protection by the government of India. It is to be stated that 
the insurance covers the insured crop. The crop insurance does not provide insurance cover for multiple vegetation. Experimental 
Crop coverage policy is obtainable to the medium farmers. Many farmers are protected underneath this insurance policy. This 
scheme provides financial security to the farmers. Crop insurance makes up the loss or harm to developing plants as a 
consequence of a selection of causes which includes drought, flood and disorder. The cultivators pay a premium and protection 
is given to them at the equal basis as in other coverage. Whilst the production from an insured acreage falls under the insured 
insurance, the risk is entitled to an indemnity. 
 
2. Literature Review 
The study reviewed the provisions, performance and improvements in Pradhan Mantri Fasal Bima Yojana scheme. PMFBY was 
compared with NAIS and was found that PMBFY benefited more to farmers with low premium rate, covered majority of the 
risk and they used technology for the settlements (Mahatma Jyothi Rao Phoole, 2017).The study was conducted to know the 
better scheme in Andhra Pradesh and it was found that more number of farmers was benefited under weather based crop 
insurance scheme (Karthick (2016).The other study  evaluate the mass acceptance of NAIS under control of AIC of India 
among loanee and non-loanee farmers. The study showed 40% of the Loanee farmers were unaware of compulsory insurance 
benefit of NAIS scheme (Avik Challoadhaya 2016). Examine and associate indicators with their coverage, financial performance 



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and operational efficiency that provide safety for the farmers. He finds that WBCIS WBCIS performance better than NAIS 
because of the higher adoption rate, higher percentage of the farmers are benefited, lower premium (Mamatha Swain 2015). 
Elicit the issues and challenges of agricultural insurance in India. It was found that there was an issue relating to operations 
,governance and financial sustainability .NAIS scheme only covers sowing risk ,post harvesting losses are not covered 
(Shathabonia Raju 2015). Paper has studied the structures and concert of National Agricultural Insurance Scheme (NAIS) 
working in the country and has optional some alterations to make it more operative. National Agricultural Insurance Scheme has 
served very limited purpose. The coverage in terms of area, number of agriculturalists and worth of farming production is very 
lesser, sum of indemnity, created on area approach, miss affected the farmers outside the compensated area, and many of the 
other policy are also not feasible (S.S. Raju, 2015). 
 
3. Objectives of the Study 

 To study the currently available crop insurance schemes and challenges in crop insurance  
 To study  the performance of the  crop insurance in chickmaglur district 
 To study acceptance of crop insurance amongst the loanee and non-loanee farmers. 
 To study the problems  faced by farmers in  crop insurance and provide suitable suggestions                             

 
4. Database and Methodology 
Data Collection: The present study is conducted to understand and know the importance of crop insurance and the factors 
which are affecting towards acceptance of crop insurance .The analysis is conducted using primary data collected from the 
farmers and descriptive statistics is used to derive results. For this research a total of 348 Farmer’s in Chikmaglur district have 
been collected. 
Primary data: Questionnaire survey was done to collect the opinions of farmers in chickmagalur district. Obtained data was 
analyzed using SPSS statistical software to examine the relationship among the identified factors. 
Secondary data: This data is collected through Literature reviews, Websites and books  
                                                  
5. Results and Discussion 

Table 1: Showing Reliability statistics  

Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items 

.806 .861 23 

Table 1 measure the questionnaires consistency Cronbach’s α was used. The complete coefficient was found to be 0.806 which 
outstrips the marginal approvals i.e., 0.70. Hence, the sustainability and strength of the implement is reasoned to be good.  
 
5.1 Hypothesis 
H0: Satisfaction, Financial security, Income stability loan repayment has no significant impact   in   Future acceptance of crop 
insurance 
H1: Satisfaction has a significant impact on Future acceptance of crop insurance 
H2: Income stability has a significant impact on Future acceptance of crop insurance 
H3: Financial security has a significant impact on Future acceptance of crop insurance 
H4: loan repayment has a significant impact on Future acceptance of crop insurance 
 
5.2 Correlations 

Table 2: showing Correlations between Future acceptance and Loan Repayment  satisfaction  Financial security                                                                    
Income stability 

 Future acceptance Loan 
Repayment 

Satisfaction Financial security Income stablity 

Future acceptance Pearson 
Correlation 

1 .510** .780** .705** .722** 

Sig. (2-tailed)  .000 .000 .000 .000 

N 348 348 348 348 348 

 
 

In Table 2 correlation results reveal that there is a positive relation between financial security, Loan Repayment 
Satisfaction, income stability and Future Acceptance. As we can see that the correlation coefficient is 0.510, 0.780, 0.705, 0.722 
between financial security, Loan Repayment Satisfaction, income stability and Future Acceptance respectively at of 0.01 level of 
significance of financial security and Future Acceptance. 



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5.3 Regression 
Table 3: Showing regression Model Summary 

Model R R Square Adjusted R Square Std. Error of the Estimate 

1 .824a .679 .675 .475 

 
Table 4: Showing regression coefficient 

Model Unstandardized Coefficients Standardized 
Coefficients 

T Sig. 

B Std. Error Beta 

1 (Constant) .156 .078  2.014 .045 

Income stability .139 .085 .121 1.628 .104 

Financial security .258 .074 .235 3.469 .001 

Satisfaction .487 .042 .518 11.657 .000 

Loan Repayment .039 .035 .042 1.108 .269 

a. Dependent Variable: Future acceptance 

 
Table 3 and 4 shows that the model is capable of explaining 67.9% of the impact of future acceptance of crop 

insurance by independent variables such as satisfaction, financial security, and Income stability loan repayment. This is from the 
evidence that the Adjusted R Square is 0.679, which also means that remaining 32.1% on future acceptance will happen by the 
factors that are not included in the model. 

In order to study Future acceptance of crop insurance in chikmaglur district, correlation and regression analysis is been 
conducted. From the results it is concluded that there is a relationship between Future acceptance, Satisfaction, Financial 
security, Income stability. This makes us reject the null hypothesis H0. That is the statement “Satisfaction, Financial security, 
Income stability has no significance in   Future acceptance of crop insurance.” Is rejected. The results obtained show considered 
has a strong impact on Future acceptance of crop insurance which makes us accept the alternate hypothesis. 
 
5.4 Chi-Square Tests 
The Null Hypotheses H0: There is no significant influence of loan status on decision of taking crop insurance. 
The alternative Hypothesis H1: There is significant influence of loan status on decision of taking crop insurance. 
 
Table 5: showing chi-square test 

 Value  Df Asymptotic 
Significance  
(2-sided) 

Exact Sig. (2-sided) Exact Sig. (1-sided) 

Pearson Chi-Square 10.566a 1 .001   

Continuity Correctionb 9.020 1 .003   

Likelihood Ratio 8.688 1 .003   

Fisher's Exact Test    .005 .003 

Linear-by-Linear Association 10.535 1 .001   

N of Valid Cases 348     

a. 0 cells (0.0%) have expected count less than 5. The minimum expected count is 5.43. 

b. Computed only for a 2x2 table 

 
Table 5 observes that Pearson Chi-Square value is 10.56 at 1 degree of freedom .The p value is 0.005 which is less 

than the alpha value 0.05 .Hence the it is significant.so we reject the null hypothesis i.e. H0: There is no significant influence of 
loan status on decision of taking crop insurance and accept the alternative hypothesis i.e. H1: There is significant influence of 
loan status on decision of taking crop insurance. . 0 cells (.0%) have expected count less than 5.Cramer’s v value represents the 
size of the effect .here the Cramer’s value is .174 which means there is a good effect on influence of loan status on decision of 
taking crop insurance. 
 
6. Conclusion 
The study revealed the farmers have taken crop loan depending on their income. It was found that loan status of the farmers 
influence the decision of taking crop insurance. The studies found that crop insurance have helped farmers in repayment of loan. 



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The study found that crop insurance helps in stabilizing the income of the farmers. It was found that the pay out of the crop 
insurance is low and also more time is taken by the surveyors for assessment which delays the claim settlement. The premium of 
the (PMFBY) Pradhan Mantri Fasal Bima Yojana is comparatively more than (WBCIS)Weather based Crop Insurance Scheme 
(PMFBY) Pradhan Mantri Fasal Bima Yojana provides more benefits compared to any other schemes It was found that majority 
of the farmers were satisfied with the currently  available crop insurance schemes and would suggest to their  friends and relatives   
Crop insurance provides protection to farmers against crop loss.it helps farmers to repay their debts during the time of financial 
loss due to crop loss .it also provides replant security and preventive planting .crop insurance protects farmers form the financial 
loss due to pesticides and weather changes .it acts as tool to farmers which helps farmers which helps farmers to manage their 
financial yield and yield loss. Insurance coverage conduct awareness programs and protects farmer’s farm. National bank for 
agricultural and rural development and reserve bank of India must monitor the regulation regarding the compulsory cop insurance 
for loaned farmers. Financial institutions must settle the claims on time. The premium of MAINS must be reduced. 
 
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