Sa-Dhan Newsletter Volume 1 Issue 4

Micro-Insurance

Table 3: Coverage under Cattle Insurance

Loan amount

Amount of

Number

Premium

Year

Per animal

Premium

premium

of loans

Collected

(in Rs.)

(in Rs.)

99 - 2000

7,000- 9,000

5 % of loan amount,

Rs. 350 - 450/-per

245

86,850

later on changed to 4%

animal per year

2000-01

11,000

4% of loan amount

Rs. 840/- per

370

2,89,800

subject to the value of

animal for twoyears

the animal actually

purchased.

4.4 CLAIMS ADMITTED

Since the inception of the scheme there have been eleven cattle deaths and consequent claims.  Four claims

were considered in the first year ending March 2000 and seven in 2001. While all the claims have been settled

in the first year, one claim has been rejected in 2001. Out of the six claims admitted in the 2001, four have

been settled and two are likely to be settled.

The formal insurance companies have actuarial knowledge on the mortality rate of livestock and according

to them the mortality rate of 4 per thousand is the national average. However, the mortality rate in case of

LEAD is high at almost 16 per thousand. This is due to the small number of animals covered.

Table 4: Moral Hazard Mitigation

Measures taken by LEAD to

Type of moral hazard

Stage

prevent moral hazard

The claim settled is only for 75%

1. The actual value of the animal

A. Purchase of animal

purchased could be less than the insured

and 80% of the insured amount in

amount of Rs.10,000 - 11,000/-.

the  first  and  second  year

respectively.

The animal has to be changed for a

2. Clients indulge in blatant cheating by

better one.

buying a cow worth Rs. 5,000/-.

The same set of staff that verifies

3. The animal shown at the time of

the animal will tag the animal also.

verification is exchanged for a lesser

Under consideration is the proposal

valued animal at the time of tagging.

to mark clear identification of the

animal by measurements, photo etc.

at the time of verification.

Cows are worshipped as goddess

1. Negligence of the animal if it is barren/

and hence are not so much

B. Rearing of the animal.

dry/ not yielding enough milk.

neglected. Risk is more in the case

of buffaloes. Employment of para

vets and adequate cattle care

especially artificial insemination can

address this problem to some

extent.

Client sensitization and adequate

2. Relying on old customs and practices

C. Death of the animal

cattle care can address this problem.

for curing sicknesses, which may result

in serious and incurable sickness of the

Inspection of the carcass of the

animal.

animal is a pre requisite for

accepting  the  claim.  Earlier,

3. Selling the animal especially in case

informing the doctor was time

of sickness/ barrenness and infertility

consuming. Now, village level para

and claiming insurance by declaring the

vets can act as watchdogs. Usually

animal as dead.

informal enquiry in the village also

throws light on the actual situation.

1. Disposing of the animal quickly if it

Same as B.

dies of any cause, which is not claimable

under the insurance policy.

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