Transcript Slide 1

Cattle insurance business has been commenced w.e.f.
1-10-97 by GIC of India. The word `Cattle’ refers to :
•Milch Cows &Buffaloes
•Calves/Heifers
•Stud Bulls
•Bullocks
The age group of animals to be covered under
insurance scheme is prescribed as:
Milch Cows
Milch Buffaloes
Stud bulls
Bullock
2 to 10 years
3 to 12 years
3 to 8 years
3 to 12 years
Why cattle insurance?
 Risk reduction mechanisms are working poorly
• Poorly executed vaccination and other prophylactic
measures
• Lack of good breeding and genetic improvement methods
• Improper feeding and sheltering facilities with the farmers
• Poor rural veterinary infrastructure
 Insurance products presently offered are limited to
catastrophic death and disability covers
 Low penetration of livestock insurance with <10%cattle
insured due to
• Slim Covers
• Problem with distribution channels
• Literacy and awareness
Year
Livestock Penetration
Present
6.58%
2007-08
11.50%
2008-09
16.50%
2009-10
21.50%
2010-11
26.50%
2011-12
31.50%
Livestock Management System
Risk
Transfer :
Insurance
Risk reduction Strategies:
Vaccination, breeding and deworming
• AI – Breed
development
• De-worming
• Vaccination
• Fodder
Development
Milk and meat
Production
• Identification of
animals (for
sourcing)
• Migration patterns
Inputs
10th Five year plan budget
•Cold-chain
•Quality
measures
•Assured market
Supply Chain for
final products
Year
Implementing
Note
Agency/program
1971
“Cattle insurance scheme” by Nationalized banks began to finance the purchase
Small Farmer’s development
of cattle and agreed to collect premium from
agency
beneficiaries. Cover was for one year and premium
was collected annually.
1983
“Cattle insurance policy”
Livestock and asset insurance was extended to the
under Integrated Rural
poor along with subsidized loans (50% subsidy).
Development Program
Compulsory product. Devised by General Insurance
Company (GIC) and implemented through its four
subsidiary agencies of GIC 1983 onwards.
1983
Market agreement
No subsidy and voluntary product. For non-scheme
animals. Premium- 2.85-4%. Age specified .
1999
IRDA
Inception of IRDA, liberalization of Indian
insurance industry
2001
Private players registered
onwards
2005
ICICI Lombard, IFFCO-TOKYO, HDFC , Royal
Sundaram
Micro-insurance regulation,
Micro-Finance Institutions (MFIs), Non-
2005
Government Organizations (NGOs) and Self-Help
Groups (SHGs) can act as an agent for insurance
companies to increase the penetration of insurance
in the rural markets.
2005-06 “Livestock insurance
scheme” implemented by
Premium of the insurance is subsidized to the tune
of 50%; Competition increased between public and
State Livestock Development private players- premium not to exceed 4.5% for
Boards (SLDB and State
annual policies and 12% for three year policies.
Animal Husbandry
Scheme is extended in 11th Five Year Plan (2007-
Departments
2012) to cover entire country.
Identification of animal
All insured animal should be suitably identified by one or
more
of the following methods:
 Ear tagging
 Natural identification and colour should be clearly noted in
the proposal form
 Photograph of animal may be insisted in case of high value
animals
 Branding with hot ironing and tattooing
Business
 4 Public insurers and 16 private insurers
 Public insurers

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
New India
United India
Oriental insurance
National Insurance
 Private insurers


Royal Sundaram
ICICI Lombard
 Loss ratio: 40-80% (Various Insurance agencies)
 Premium rate: 2.5- 6% per annum
Insurance Co.
New India Assurance Co.
ICICI Lombard Insurance Co. (loan)
ICICI Lombard Insurance Co. (retail)
Pre.(1 yr)
5.95%
3.56%
3.80%
Pre.(3 yrs)
12.75%
7%
8.30%
Business
PM
FOR
& Claim
EAR
settlement
TAGGING
 Price of cattle: Rs 10,000
 Premium: Rs. 400
 Veterinary charges: Rs 50 + Rs 200
 For claims:
INSURANCE COMPANY
FARMER
Send the person to identify that
animal died is same
Have to bear veterinarian
charges
Pay-out ratio: 1:25 animals
If no claims are settled then
thinks it a loss of Rs 400 (paid as
premium)
Challenges
 Supply related challenges:
 Process issues

High transaction cost:



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
Identification of the animal
Assessment of cattle value
Claim settlement process (fraud) and
Other administrative processes
Premium pricing


Absence of historical data
No actuarial fair pricing
 Product issues


Limited risk covered
No innovations in extending coverage (e.g. for infertility)
 Demand related challenges
 Ability and willingness to pay
 Lack of awareness
 Non-standardized risk reducing practices
Way-out
 Un-removable ear tag
 RFID- External and internal
 Double tagging
 Both ears conventional ear tag
 One ear conventional and other RFID
 Un-removable ear tags at both ears
 DNA finger printing
 Retinal and cephalic index
 Muzzle identification