IFFCO-Tokio General Insurance Co. Ltd. (ITGI) is piloting a cattle insurance project targeting more than 25,000 poor farmers and their families in the Indian states of Gujarat, Punjab, Maharashtra, Rajasthan and Orissa. For these farmers, livestock is one of the main sources of income, mostly from the milk produced and sold daily to milk producer cooperative societies. In this context, livestock insurance is a critical service to mitigate the loss associated with the death of the animals. However, the claims for livestock insurance are often high due to the prevalence of moral hazard and fraud, reducing the availability of affordable coverage.
This project aims to test a model to reduce fraud by using an identification device placed under the hide of the animal. The identification device is based on RFID (Radio Frequency Identification) technology. The current means of identifying the insured animal is through ear tags, which can easily be lost or removed. By reducing fraudulent claims, the technology can benefit farmers through lower premiums to reflect the reduced claims. Additionally, the technology, used to store information about livestock such as vaccinations, can support the cooperatives and milk unions to improve herd management. Another key feature of the system is ITGI’s utilization of IFFCO’s wide network of cooperative societies as distribution channels to reach the economically underprivileged rural masses. The advent of more sustainable livestock insurance can also promote greater product development, and invite other actors to enter the sector.
The “Pashu-Dhan Bima” covers death of insured cattle for a premium from three to four per cent of the sum assured (value of the cattle). The insurance product is offered as a credit-linked product for farmers or cattle owners who borrow from the Co-operative Bank or Co-operative Credit Societies.ITGI uses the network of “Bima Kendras”, IFFCO-Tokio’s micro offices to market the product. The offices are staffed by “Bima Sahayaks”, relationship executives, who educate the village co-operative society staff and the farmers about the product at the time of enrolment. All the insurance related brochures and claim process documents are made available at the village co-operative society offices.
Relationship executives are contact points for the farmers for all the issues related to the cattle insurance. They along with a veterinary doctor inspect each and every cattle before insurance. The veterinary doctor injects the RFID capsule close to an ear. The relationship executives the tag number by reading the same using the RFID reader. They then complete the following steps: explain the processes of identification and claim settlement to the household, demonstrate the identification number reading, take a photograph of the animal to identify the animal and the veterinarian issues health certificate of the cattle.
At the time of claims, the farmer has to inform the relationship executives about the death of the cattle. The executives visit the site and inspect the carcass. They identify the cattle using the RFID reader and certify the cattle. The farmer also has to submit a post mortem report, issued by a practicing veterinarian along with two photographs of the animal. The normal claim settlement process takes less than one month because of the process improvements such as RFID identification, physical verification by insurance advisor and fewer documentation requirements.
The project has been completed. Detailed lessons from the project are published in a case study – A case for livestock insurance by Dalal et al.
Date of last Learning Journey update: September 2012