Scope of

Livestock
Insurance
Insight to the livestock insurance
business, its benefits and
shortcomings

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Livestock Insurance in India

110 million people and 300 million cattle

Four Public Insurers while 12 private insurance offer Livestock

Insurance Policy (Aka Cattle Insurance Policy).

The word `Cattle refers to :

Milch Cows &Buffaloes

Calves/Heifers

Stud Bulls

Bullocks

Insurance products presently offered are limited to catastrophic

death and disability covers
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Cattle Insurance Product

Cattle is covered at maximum market value

Age Group:

For Cow : 2 years to 10 years

For Buffalo : 3 years to 12 years

Coverage provided:

Death

Permanent Disability covers also available

No theft cover

No health cover

Premium charged:

4%-7% of Sum insured

1% extra for PTD cover

Exclusions:

No tag No claim

Illness contracted before policy

commencement

Air Travel and Sea Travel

Accident by nuclear weapons and warlike

situation

Theft

Use of animal for the purpose other than

specified in policy

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How Cattle Insurance is sold

1) Bancassurance Model

Financing bank has

tie-up with Insurer
Customer purchases
cattle on loan
Bank mandates
customer to insure
cattle

Premium is charged
by the bank

Insurer which has tieup with financing

bank insures the
cattle
Customer is charged
premium by a bank

Cattle gets insured

and financing bank
owns a policy
Insurance policy as
collateral
Cattle is insured

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Bancassurance Model

Benefits

Customer reached directly by an insurer

Claim settlement is done through a bank

Drawbacks

Borrower becomes apathetic towards cattle if not able to pay off the loan
amount.

Slow claim intimation by a bank

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How Cattle Insurance is sold

2) Co-Operative Society Model
Insurer approached to cooperative society
Co-operative society asks
customers to buy cattle
insurance policy

Co-operative society
collects premium

Veterinarian issues
health certificate to
each cattle

Insurer collects the premium

from co-operative society.

Cattles are provided with

ear tag for identification
purpose
Some insurers also
mandates to take four
photos of cattle for further
identification

Master policy is
issued in the name of
Co-operative society

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Co-operative Society Model

Prevalent in rich agricultural states such as Gujarat, Punjab.

50% subsidy is provided by government through State Livestock

Development board.

Benefits:

Marketing is easy and cost is minimum.

Insurer can get all the customers at single point.

Drawbacks:

Policy is issued for large number of cattle hence chances of errors in underwriting is
possible.

Examining each and every cattle is tedious task.

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Claim Settlement

Insurer must be informed within 12 hours of the death of cattle

No claim no tag

Post-mortem of carcass is conducted within 24 hours of death

Ear-tag and natural birth mark, along with earlier photos are confirmed for
identification

Death certificate is issued by veterinarian

In event of accident, customer also needs to provide an FIR to insurer

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Problems faced by Insurer

No Photo identification used by Public Insurers

Higher claim ratio for public insurers

No awareness regarding livestock insurance in the market

No focus on TV ads and radio ads

Cost of hiring veterinary is high

Higher administrative charges

Chances of moral hazard of market value of cattle drops below the sum
insured

No proper record of the customers and subsidy provided

Adverse selection
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Problems faced by Insurer

No proper health care for cattle by customer after insuring it

Lesser number of non-subsidized customers

No basis for charging premium and the charged premium is lower than
necessary

Agents avoid livestock segment due to lesser commission

No penalty for underinsurance

No proper infrastructure for cattle

No measures for risk reduction

Higher cost of making entry into livestock insurance market

Soaring claim ratio during epidemic disease

High administrative charges as no insurance offices in rural areas

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10

Livestock Insurance from Customers

Perspective
Cattle Insurance Customers Occupation
Information about Cattle Insurance

Issuing a Policy
Bancassurance; 24%

Other;Insurer;
8%
8%
Newspaper; 3%

Cattle; 35%

Bank; 24%
Credit-Linked Society; 76%

Farming; 65%

Head of village; 57%

Farming

Cattle

Other

Insurer

Head of village

Newspaper

Other

Bank

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Bancassurance

Credit-Linked Society

Third Party

Direct

11

Livestock Insurance from Customers

Perspective
Awareness regarding Policy cover
Influential Factor

Yes; 38%

Depends on Milch Capacity; 46%

Partially Aware; 38%

Cover; 38%

Policy without Subsidy

Fully Aware; 62%

Subsidy; 62%

No; 16%
Yes

Subsidy

Cover

Other

No
Fully Aware

Partially Aware

No Awareness

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Depends on Milch Capacity

12

Livestock Insurance from Customers

Perspective
Major Drawback of Policy

Claim Satisfaction

No Direct Selling of Policy; 11%

Above Expectation; 16%

No Choice of Insurer; 8%

Satisfactory; 5%

No Theft Coverage; 51%

No Health Insurance Coverage; 30%

No Claim Made; 78%

Above Expectation

Satisfactory

Below expectation

No Claim Made

No Theft Coverage

No Health Insurance Coverage

No Direct Selling of Policy

No Choice of Insurer

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13

Problems faced by Customers

Lack of theft-cover leaves a lot to be desired

Customer has no choice of choosing insurer

Ear-tags provided are fragile

Customer suffers loss in event of a death of cattle if market value at that time
is higher than the insured value

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14

Suggestions

Innovation and extension of product

Offer a theft cover with the help of globally Radio-frequency identification by

charging higher premium to the customer at his will

Devising marketing strategy and focusing on TV/Radio ad and newspaper ads

Prepare actuarial data separately for each state based on last 3-4 years of claim data

Tie-ups with village heads

Mandate regular health checkups for cattle

Maintenance of subsidy data

Make comprehensive policy covering agricultural insurance and livestock

insurance

Charge premium on risk basis

Provide no claim bonus

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15

Thank
You
By:
Aejazhussain Master
141637
PGDM 2014-16

9/15/15

16