Sa-Dhan Newsletter Volume 1 Issue 4
Micro-Insurance
Table 6: Income and Expenditure Statement
Income
1999-2000
2000-01
Expenditure
1999-2000
2000-01
Premium collected
86,850
2,89,800
40,000
55,000
Salary
Veterinary doctor Para
24,000
33,300
vets Other staff
29,000
Cattle care fees
74,000
Honorarium for
42,000
38,500
consultant
Grants received for
40,000
67,350
Claims settled
20,000
30,000
veterinary staff salary
Over heads
2,600
4,790
Medicines
11,000
Loss
1,750
Profit
2,29,560
1,28,600
4,31,150
,28,600
4,31,150
The programme suffered nominal losses during the
significant part of the initiative is that of going be-
first year if the indirect costs are also included for
yond offering a vanilla insurance product and inte-
calculation of profit. During the second year the
grating it with cattle health. By educating the cattle
profits have increased. However, this includes cattle
owner on good practices in cattle care, providing para
care fees for two years collected in November and
vet and veterinary doctors' support, LEAD has sought
bulk of the expenditure will be incurred during the
to manage the risk of cattle death effectively. Starting
next year. Similarly, the organization has received
with borrowers is a logical market penetration strat-
grants from Rabo bank and German Agro Action for
egy, even if it has met with some initial resistance
meeting the salary expenses of the veterinarian and
from clients.
20 of the para vets. Excluding the cattle care fees for
the second year as well as the grants received, the
Cattle care could be offered more comprehensively, by
profits are Rs. 1,25,210/- for 2001.
including artificial insemination (AI) facilities, so that
there is greater voluntary participation. If comprehen-
sive cattle care is made part of the scheme, then it can
7
REINSURANCE
be marketed as a general product to non-borrowers
One formal insurance company has approached LEAD
as well, which will improve the viability.
to reinsure the insurance portfolio. LEAD is expected
to pay 62 .5 per cent of the premium collected to the
9
CREATION OF RESERVE FUND
organization for getting the re insurance cover. LEAD
held discussions with another formal insurer for get-
The organization does not have any reserve for meet-
ting better terms. The second organization felt that
ing a run on the programme. With the proposed
unless the full premium collected is passed on to
expansion in the programme the organization should
them, it was not profitable for them to undertake
build reserves for likely settlement of large-scale
reinsurance. It strongly advised LEAD not to re insure
claims. Donor support is required to build the initial
with the other company since there was no guarantee
reserves and in due course a portion of the profits will
that the claims admitted by LEAD will in turn be
be apportioned to augment the reserves.
admitted by the insurance company. This will result in
either loss for LEAD if it settles the claim or displea-
10 VOLUNTARY SCHEME: ADDRESSING THE
sure among the clients if it rejects the claims rejected
CLIENT NEEDS
by the insurance company. LEAD has decided to
continue with the status quo.
One important aspect being considered by LEAD is to
make the scheme more voluntary. As long as the
clients view it as a compulsion, the scheme may not
8
ORGANIZATION NEEDS
be very popular among the clients. Building in client
We at LEAD feel that some pioneering work in micro
needs into the programme is a sure way to achieve
insurance has been done. Cattle insurance is a
the desired results. At present the clients are in need
difficult, but needed service in the rural areas. The
of reliable and facile AI services for the animals.
The funds will be centrally monitored. However, the local committee will be informed of the amount of premium collected
5
form the area, expenses incurred, the number and amount of claims settled and balance amount left so that they
are able to curb the tendency of escalating claims.
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