LIVESTOCK INSURANCE MUTUAL MODEL Indira Kranthi Patham P.Chinna Thataiah, Regional Project Director, SERP, Hyderabad

LIVESTOCK INSURANCEMUTUAL MODEL

Indira Kranthi Patham

P.Chinna Thataiah, Regional Project Director,SERP, Hyderabad.

PRELUDE

• Livestock is the most important asset for the poor Livestock is the most important asset for the poor and are susceptible to different types of risks.and are susceptible to different types of risks.

• Accidental Death of animals in not uncommon. Accidental Death of animals in not uncommon.

• The mortality among livestock is one of the The mortality among livestock is one of the principal reasons for the loan default by the poor.principal reasons for the loan default by the poor.

• Livestock are subject to risk of disease and death Livestock are subject to risk of disease and death resulting in grievous loss in the livelihoods of the resulting in grievous loss in the livelihoods of the poor in the absence of comprehensive insurance poor in the absence of comprehensive insurance for livestock. for livestock.


Emergence of an idea

• A detailed analysis by CBOs (VO / MS / ZS) on the A detailed analysis by CBOs (VO / MS / ZS) on the disintegration of the groups revealed sudden death of milch disintegration of the groups revealed sudden death of milch animal which is a major source of income resulted in fall in animal which is a major source of income resulted in fall in income levels thereby making them to default payments.income levels thereby making them to default payments.

• To whirl this situation CBOs have demanded to put in place To whirl this situation CBOs have demanded to put in place a mechanism to re-create the lost asset.a mechanism to re-create the lost asset.

• Outcome of detailed discussions in Zilla Samakhya is to pilot Outcome of detailed discussions in Zilla Samakhya is to pilot asset insurance scheme to begin with livestock and to pilot it asset insurance scheme to begin with livestock and to pilot it in one District of the State.in one District of the State.


Vizianagaram Model in Short

• The scheme is christened as Loan The scheme is christened as Loan Protection Scheme with an Protection Scheme with an objective to provide relief to the objective to provide relief to the SHG members who owns the Milch SHG members who owns the Milch Cattle (Buffalo / Cow), in the case Cattle (Buffalo / Cow), in the case of death of the animals to recreate of death of the animals to recreate the lost asset. the lost asset.

• This is a premium based scheme with an annual premium @ 2% on This is a premium based scheme with an annual premium @ 2% on the total cost of the animal. The insurance is valid for one year. the total cost of the animal. The insurance is valid for one year.

100% of the cost of the animal insured will be paid to the member with in 7 100% of the cost of the animal insured will be paid to the member with in 7 working days after reporting of claim in call centre.working days after reporting of claim in call centre.

• The scheme is totally self-managed by CBOs. Accounting, Monitoring The scheme is totally self-managed by CBOs. Accounting, Monitoring

and Documentation systems are conceived and designed in house.and Documentation systems are conceived and designed in house.


Insurance Procedure

• Every SHG member intending to join the Every SHG member intending to join the scheme has to submit a written scheme has to submit a written application to the ZS through MS and VO.application to the ZS through MS and VO.

• The VO and MS need to recommend the The VO and MS need to recommend the application. application.

• The applications shall be accompanied by The applications shall be accompanied by an amount equivalent to 2% of the an amount equivalent to 2% of the estimated value of the animal. estimated value of the animal.

• On approval of the application Zilla On approval of the application Zilla Samakhya will issue a bond.Samakhya will issue a bond.

• Once the policy bond is provided to the Once the policy bond is provided to the member, it is presumed that the animal is member, it is presumed that the animal is insured from that date for a period of one insured from that date for a period of one year.year.

• Two photographs of all the animals Two photographs of all the animals insured are taken & kept as record in ZS insured are taken & kept as record in ZS Call Centre.Call Centre.

Submission of application

VO / MS recommendation Letter

Subject to: Application being accompanied by

the above letter DD @ 2% as entrance fee

Approval ofZilla Samakhya

Issue of Bond (Certificate of insurance)


Redemption of Claim

• Upon the death of insured Upon the death of insured animal, the information passed to animal, the information passed to call centre (09701115588 & call centre (09701115588 & 09491031113) by either member 09491031113) by either member or VO or Villager.or VO or Villager.

• Call centre directs the Bhima Call centre directs the Bhima Mitra to visit the Village.Mitra to visit the Village.

• Bhima Mitra along with the VO Bhima Mitra along with the VO conducts local enquiry, takes a conducts local enquiry, takes a photograph of the dead animal photograph of the dead animal and submits the documents to and submits the documents to the LPS sub-committee in Zilla the LPS sub-committee in Zilla Samakhya along with Samakhya along with recommendations of VO.recommendations of VO.

Contd..Contd..


• LPS sub-committee will LPS sub-committee will either settle or reject the either settle or reject the claim based on the merit of claim based on the merit of the documents produced the documents produced and recommendations of the and recommendations of the Bhima Mitra and VO.Bhima Mitra and VO.

• The claim is settled to the The claim is settled to the VO by way of cheque/DD. VO by way of cheque/DD.

• The VO will settle the claim The VO will settle the claim to the member in cash / to the member in cash / cheque as decided by cheque as decided by member / SHG.member / SHG.

Redemption of Claim

Information to Call Centre

CLAIM SETTLEMENT PROCEDURE

Inspection by Area Committee consisting of Community Members

Submission of Application in the prescribed format

Recommendation by VO, elders of the Village

Enclosure of Photograph of the dead animal

Recommendation of Mandal Samakhya

Approval of the claim by Zilla Samakhya

Issue of Cheque / DD in favour of VO

Payment to the member by VO / OB


• The community based animal insurance scheme is The community based animal insurance scheme is perhaps the first of its kind in the country. perhaps the first of its kind in the country.

• The major advantage with the scheme is that it is The major advantage with the scheme is that it is community owned hence bogus claims can be community owned hence bogus claims can be totally eliminated.totally eliminated.

• Increase in the number of animals insured and Increase in the number of animals insured and less number of deaths lead to an idea of reducing less number of deaths lead to an idea of reducing the premium. (premium reduced from 4% to 2%) the premium. (premium reduced from 4% to 2%)

• Zilla Samakhyas aim is not to earn money but to Zilla Samakhyas aim is not to earn money but to mitigate the risk. mitigate the risk.

• The claim settlement process is very simple and The claim settlement process is very simple and time bound. time bound.

PerformanceIndira Kranthi Patham

• Claim settlement is within 7 days. No Postmartum, Claim settlement is within 7 days. No Postmartum, No death certificate required from AH Department. No death certificate required from AH Department. Simple certificate by VO, Verification by MS / ZS Simple certificate by VO, Verification by MS / ZS Bhima Mitras and a photograph of dead animal Bhima Mitras and a photograph of dead animal taken by Bhima Mitra is what all required. taken by Bhima Mitra is what all required.

• The simplicity of the scheme lies in the fact of The simplicity of the scheme lies in the fact of intimation of the claim just by a phone call to the intimation of the claim just by a phone call to the call centre. The rest including documentation, call centre. The rest including documentation, photography and Processing of Settlement etc., is photography and Processing of Settlement etc., is all done by the bhima mitras at no cost to the all done by the bhima mitras at no cost to the member who never moves out of the village at member who never moves out of the village at either enrolment or settlement of claim stage.either enrolment or settlement of claim stage.


3519

88

4756

120

48675

327

90035

100

0

20000

40000

60000

80000

100000

2006 2007 2008 2009

Enrolment Settled

2006 2007 2008 2009-10Enrollment 3519 5112 48719 90035Claims Received 88 120 327 100

% of Claims 2.50 2.35 0.67 0.11


Experience of Vizianagaram ZS with Loan Protection Experience of Vizianagaram ZS with Loan Protection Scheme has successfully demonstrated that CBOs can run Scheme has successfully demonstrated that CBOs can run livestock insurance schemes on a fairly large scale. livestock insurance schemes on a fairly large scale.

SL NO

Cause of deathCLAIMS

2006CLAIMS

2007CLAIMS

2008CLAIMS

2009

1 Acute Timpanists 43 52 152 21

2 Hemorrhagic Septicemia 12 18 57 12

3 Trypanosomiasis 9 5 21 18

4 Food & Mouth Disease 7 13 22 10

5 Food & Poisoning 5 8 25 15

6 Milk Fever 1 3 18 14

7 Black Quarter 3 9 23 8

8 Snake Bite 8 12 09 2

TOTAL 88 120 327 100

DEATHSIndira Kranthi Patham

• Zilla Samakhya is now the largest agency with 90,035 animals in its Zilla Samakhya is now the largest agency with 90,035 animals in its clientage which is much more than all the insurance companies in clientage which is much more than all the insurance companies in Vizianagaram put together.Vizianagaram put together.

• It is essential to keep the cost of overheads as well as running It is essential to keep the cost of overheads as well as running expenditure at the minimum, to ensure the sustainability of the scheme. expenditure at the minimum, to ensure the sustainability of the scheme.

• The success of the scheme lies in its simplicity and time boundness in The success of the scheme lies in its simplicity and time boundness in settlement of claim. settlement of claim.

• The success of the scheme critically hinges on the ability of the CBOs to The success of the scheme critically hinges on the ability of the CBOs to check bogus claims. The community supervision and vigilance that was check bogus claims. The community supervision and vigilance that was found to be very effective should be nurtured further. found to be very effective should be nurtured further.

• An important precondition for the success of the scheme is its ability to An important precondition for the success of the scheme is its ability to negotiate a re-insurance with any company in the market. Re-insurance negotiate a re-insurance with any company in the market. Re-insurance minimises the total liability on the ZS and distributes the risk port folio. minimises the total liability on the ZS and distributes the risk port folio. However, economics of re-insurance needs to be worked out carefully. However, economics of re-insurance needs to be worked out carefully. United India Insurance Company came down from 4% to 2% + TAX, United India Insurance Company came down from 4% to 2% + TAX, keeping in view the experience of Vizianagaram district and also agreed keeping in view the experience of Vizianagaram district and also agreed to honour all claims settled by Zilla Samakhya without any fine print.to honour all claims settled by Zilla Samakhya without any fine print.

LEARNINGSIndira Kranthi Patham

Claim settlement Claim settlement processprocess

Claim settlement Claim settlement periodperiod

PostmortemPostmortem

ConditionsConditions

DocumentationDocumentation


• Very rigidVery rigid

• 30 – 60 Days30 – 60 Days

• RequiredRequired

• Person has to physically carry the Person has to physically carry the animal to the nearest hospital for animal to the nearest hospital for Postmortem.Postmortem.

• Preserve the dead animal for Preserve the dead animal for postmortem if in case of 2-3 postmortem if in case of 2-3 continuous holidays. continuous holidays.

• Physically inform the Insurance Physically inform the Insurance Company & Physically follow it up till Company & Physically follow it up till the settlement is over.the settlement is over.

• Flexible & Community Friendly.Flexible & Community Friendly.

• 7 days7 days

• Not requiredNot required



• Just leave a message in the call Just leave a message in the call centre rest all including centre rest all including documentation & handing over the documentation & handing over the cheque is taken care by Bhima cheque is taken care by Bhima Mitras.Mitras.

Traditional InsuranceTraditional Insurance Our InsuranceOur Insurance

Lot of money Lot of money saved, Time saved, Time saved and saved and Hardship savedHardship saved

Road ahead

• During the current year, in addition to Vizianagaram, Cattle insurance shall be scaled-up in 6 more Districts.

• By 2010 around 6.00 million SHG women shall By 2010 around 6.00 million SHG women shall be covered under loan / Credit Insurance.be covered under loan / Credit Insurance.

• By 2011 Cattle insurance will be universalized to all the Districts in Andhra Pradesh State covering around 10 million CATTLES.


Road ahead

• The main aim of Zilla Samakhya in running this scheme is to mitigate the risk.

• Zilla Samakhya in convergence with Animal Husbandry Department has prevented large number of deaths since last year by pressing in services of qualified veterinary doctors to attend to animal emergences.

• All the animals insured with Zilla Samakhya have been vaccinated for Foot & Mouth decease, Black Quarter, Haemorrhagis septicaemia and Antrax by Animal Husbandry Department meaning there is special medical attention for each and every animal.

• Result – Sizeable decreases in deaths.


Technologies

• Since the scheme is on to huge expansion as part of replication it is decided to bring in State - of the - art technology to keep up the pace of settlement of claims.

• Various technology options are under consideration.

• Talks are on with technology providers.


Government of Andhra Pradesh partnering with World Bank in poverty reduction Government of Andhra Pradesh partnering with World Bank in poverty reduction through empowerment of poor people.through empowerment of poor people.

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LIVESTOCK INSURANCE MUTUAL MODEL Indira Kranthi Patham P.Chinna Thataiah, Regional Project Director, SERP, Hyderabad