Economic Assessment of Crop Insurance Impact on Farmers' Income and Livelihood Outcomes: Evidence from The North District, Andaman and Nicobar Islands

The
agriculture of North District in Andaman and Nicobar Islands is very much
susceptible to climatic events causing farmers high risks in terms of their
productivity, income, and livelihoods. The current study assesses the economic
effects of crop insurance on the income and livelihood of the farmers using
primary data of 200 farmers (100 farmers have bought crop insurance and 100
farmers do not have crop insurance) during 2025 through a multistage stratified
random sampling method. This study uses several sophisticated econometrics
techniques such as independent sample t-test, chi-square test, correlation
analysis, binary logistic regression, principal component analysis (PCA),
multiple linear regression (OLS) and propensity score matching (PSM). It was
found that insured farmers get significantly higher annual farm income
(₹3,46,850) than uninsured farmers (₹2,47,320; p < 0.001). Agricultural
investment (β = 0.446), farm size (β = 0.362) and crop insurance (β = 0.318)
are the major determinants of farm income, while awareness (Exp(B) = 3.608) and
institutional credit (Exp(B) = 3.083) significantly affect the insurance
participation of the farmers. The ATE based on PSM was ₹99,530 in relation to
farm income per year with significant gains observed in livelihood resilience,
investments in agriculture, diversification of crops, and assets. This research
paper finds that crop insurance is a very good mechanism for managing risks in
agriculture that helps in boosting the income of farmers, increasing their
livelihood resilience, and ensuring sustainable agricultural development.