Cattle Insurance under IRDP

Transcription

1 The cattle insurance scheme has emerged as a saviour over the years for landless, small and marginal farmers, and for those whose major occupation is dairying. Cattle insurance has become compulsory under the Integrated Rural Development Programme. Shenoy and Raju analyse various aspects of the scheme and suggest some measures for improving the working of the scheme such as education of the beneficiaries about the benefits of insurance, introduction of group insurance, measures for quick settlement of claims, and efforts to expand insurance coverage. G V Shenoy is Professor at the Institute of Rural Management, Anand, and K V Raju is Regional Economist at the Agro-Climatic Regional Planning Unit of the Planning Commission, Sardar Patel Institute of Economic and Social Research, Ahmedabad. Untimely death of cattle could have a debilitating impact on the owner's income, more so if the owner happens to be a marginal farmer or landless labourer or a dairy farmer. It is to meet this exigency that the cattle insurance scheme has emerged as security for cattle owners in recent years by providing for indemnity in the event of death of the insured animal and also by providing insurance in the event of permanent total disability of the cattle. Apart from milch animals, calves/heifers reared under special programmes and bullocks used for ploughing have been brought within the purview of insurance schemes. The scheme has also been extended to cover other livestock and poultry from the Sixth Five Year Plan onwards. Further, the Government of India subsidizes the premium payable by beneficiaries under the Integrated Rural Development Programme (IRDP). The cattle insurance scheme was initiated through the Small Farmers' Development Agency (SFDA) in But the scheme itself got a fillip only when nationalized banks began to finance the purchase of cattle and agreed to collect premium from beneficiaries. Initially, the insurance policy was for one year and the premium was to be paid annually. Over the years, this has been modified and a long term cattle insurance policy was introduced in This scheme has been devised by the General Insurance Company (GIC) and has been implemented through four subsidiary agencies. There are two types of cattle insurance: one under the Special Livestock Production Programme of IRDP (SLPP) and the other under what is known as the market agreement. Though both types serve the same purpose, they differ in premium rates, procedural aspects, and beneficiaries covered. Cattle Insurance under IRDP Initiated in , IRDP is the single largest antipoverty programme currently under way in all the community development blocks in India. It aims at providing income generating assets and employment Vol.15, No.2, April-June

2 opportunities to the rural poor and gives special priority to underprivileged communities. Its beneficiaries are assisted through viable projects which are financed partly by a subsidy and partly by a bank loan. In the case of the milch animal scheme, the success of the programme depends very much on the viability of milk production and the sale of milk as a business at the household level (Singh, Prasad, and Raju, 1984). Insurance of milch animals is expected to considerably reduce the risk involved in undertaking dairying as a supplementary or main occupation. Insurance of cattle protects both the loan amount as well as the repayment burden of the beneficiary in the event of the death of the cattle. It is for this reason that cattle insurance has been made compulsory for all IRDP-assisted milch animals (Shenoy, Raju, and Acharya, 1987). Cattle insurance under IRDP provides the following advantages: low premium rates, extra coverage for age, and simple procedures for insurance and claim settlement. The broad terms and conditions of the insurance scheme are as follows: milch cows, milch buffaloes, and stud bulls (both indigenous and crossbreed) are eligible for insurance; the age of coverage is between two and twelve years; the sum insured is based on agreed value basis; the premium rate is 2.25 per cent of the sum insured a year to be subsidized by project authorities and financing banks; permanent total disability is covered at an extra premium of 0.85 per cent. In the case of IRDP subsidized bullocks which are put to agricultural operations, the following risks are not covered: use in hilly terrain and heavy rainfall areas for non-agricultural purposes. On the other hand, the risk of permanent total disability caused by accidents or diseases can be covered on payment of an additional 1 per cent premium by the beneficiary. The liability of the insurance company in the case of permanent total disability is limited to 75 per cent of the sum insured. The beneficiaries of milch animals insured under the IRDP project have to agree to certain conditions: Any illness or accident should be communicated to the company immediately. The insured, at his own expense, will call a qualified veterinarian in the event of illness or accident to the animal. The carcass shall be retained for at least 24 hours after a notice of death is given to the insurance company. If an animal dies, the cattle owner will have to furnish a copy of the postmortem report and death certificate jointly signed by the sarpanch of the village, president or officer of the dairy cooperative society (DCS), official of the milk collection centre or government veterinary doctor, and supervisor or inspector of the central cooperative bank. Cattle Insurance under Market Agreement Cattle insurance under the market agreement scheme is available to any cattle owner. It covers milch cows and buffaloes, calves and heifers, stud bulls and buffaloes, and castrated male buffaloes whether indigenous, exotic, or crossbred. The policy provides indemnity in the event of accidents (including fire, lightning, flood, cyclone, and famine), surgical operations, strikes, riots, civil commotion and diseases. In this scheme, age limits have been prescribed for various cattle: milch cows 2(or age at first calving) to 8 years; milch buffaloes 3 (or age at first calving) to 12 years, stud bulls (cow/buffalo species) 2 to 8 years, and exotic female calves and heifers from four months to the date of first calving. The yearly premium rate (gross) for indigenous cattle includes both breeding and calving risk. The rates for cattle owned by well-organized government, cooperative, and private dairies/apex bodies providing regular and efficient veterinary attention are: 4 per cent if less than 50 animals are insured, 3.95 per cent if the number of animals insured is from 50 to 250, and 3.90 per cent if the number of animals insured is over 250; for bullocks and male buffaloes, 2.75 per cent; and for all dairies operating under the National Dairy Development Board 2.85 per cent (net). Administration of the Scheme NABARD has laid down certain criteria for the purchase of cattle. The animal should yield at least 5-6 litres milk a day, should be in its third lactation, should not have been purchased from any village within a radius of 25 km from the village of the beneficiary, and the price should not normally exceed Rs 3,000. A purchase committee assists the beneficiary in acquiring a good breed milch animal. This committee consists of an extension officer of the District Rural Development Agency (DRDA), a veterinary doctor, a bank officer, the secretary of the village milk cooperative society and the beneficiary. The committee's role is to identify and approve a suitable animal for purchase. In actual practice, however, the beneficiary identifies and purchases the animal from the cattle market. The veterinary doctor then evaluates the price and certifies it for the insurance scheme which will be accepted by the bank. Interestingly, the purchase committee members in Pune district felt that their presence was not essential at the time of 36 Vikalpa

3 purchase of the animal. They admitted that they had not helped even a single beneficiary. In most cases, the extension officer was not aware of purchasing and loan disbursement activities. We also found that all the five members of the committee were not always available for the task when required. IRDP beneficiaries have to purchase animals only from certified cattle traders who are required to bring animals from other districts. This is expected to result in import of good breeds and in controlling prices of cattle in the local market. The trader incurs a cost in transporting animals which is passed on to the beneficiary. In the process, the final cost turns out to be about 15 per cent more than the normal price. From Precept to Practice: Study of Beneficiaries In this paper, an attempt has been made to study how the cattle insurance scheme has been managed and the problems faced by beneficiaries at field/farm level in two districts one each from Maharashtra and Gujarat. In the field study during August- October 1985, primary data were collected from 401 insured households and 38 non-insured households from 27 villages. Discussions were also held with officials at taluka/district/state levels and with representatives of other agencies involved in the cattle insurance scheme. The distribution of the sample households across different schemes and farm sizes is given in Table 1. Table 1: Distribution of Sample Households A structured questionnaire was administered to collect primary data on: details of land holding and cultivation; livestock details; milk production, consumption and sales; number of cattle deaths and causes of death in the last five years; process of insuring cattle and claim settlement; documents required for claim settlement; beneficiaries' opinions on valuation, premium rates, and other related problems. Information was collected on reasons for non-insurance. The findings are presented next. Perceived Problems of Beneficiaries in Cattle Insurance Problems Related to Premium Rates Two important elements in the cattle insurance scheme are the premium rate and the procedure for renewal. It was found that the beneficiaries to a large extent were unaware of the basis for premium rates. The premium rate for the cattle for instance is the same irrespective of the age of the cattle. The veterinary doctors are of the view that as the age of the animal increases, the insured sum and its premium should decrease. In fact, every year, before the renewal of the policy, the insured animal has to be revalued. However, this is not done and the old policy is simply renewed. At present, premium is paid by the bank on behalf of the beneficiary by debiting the beneficiary's loan account. This holds good as long as the loan is not fully repaid. But once the loan is repaid, banks do not take the responsibility for remitting premiums. In such cases, the policy lapses. In the current scheme, animals insured under the 4 per cent premium rate (non-scheme based) alone are eligible to get the insured sum when they are handicapped during the policy period whereas the IRDP/SLPP beneficiaries' cattle are excluded from this benefit. Problems Related to Documentation The beneficiaries are not aware of the procedure for insuring cattle and also the terms and obligations. There are hardly any programmes or campaigns to make them aware of the various benefits. A representative of the insurance company is expected to assist the bank or the beneficiary in filling up the proposal form and in getting an examination done by a veterinary doctor. Insurance is done almost automatically and the beneficiary need not go to different agencies. Under IRDP/SLPP, it is compulsory on the part of the beneficiary to insure his animal. Insurance protection starts from the day of purchase of the cattle. In practice, insurance companies hand over to banks all the documents which beneficiaries are expected to complete. The completed documents are then sent by the bank to the insurance company (see Table 2). In the absence of proper supportive facilities and linkages, beneficiaries find their own ways to cope with the problem. The beneficiaries of Kosam village in Olpad taluka of Surat district did not have any document to show that they had been given IRDP loans. They did not even have the bank pass book. For loan repayment, the DCS deducted the instalment from the member-beneficiary's loan amount and remitted the Vol.15, No.2, April-June

4 Table 2: Kinds of Documents Required for Cattle Insurance Purpose a) Animal Health Certificate b) Dairy Cooperative Society Membership c) Photograph d) Land Certificate e) Veterinary Doctor's Certificate f) Insurance Agent's Certificate g) Caste Certificate amount to the bank. The approximate premium amount paid was indicated on the last page of the society's pass book. Unfortunately, none of the beneficiaries we interviewed in the village was aware of the correct position. The large scheduled caste population in the village had to accept IRDP milch animals from DRDA on compulsion. In the "meet the target" approach, the quality of the animal appears to have been neglected. Owing to non-availability of fodder, high maintenance cost, and the age of the animals, beneficiaries resorted to milking the animal during the immediate lactation period and then disposed the animal off for any price ranging from Rs 300 to Rs 500, while the purchase price ranged from Rs 2,500 to Rs 3,000. Distress sales of animals have been shown as "animals dead" in the claim settlement forms with the tacit agreement of the veterinary doctor. Problems Related to Claim Settlement The complicated procedure in the settlement of claims has had a negative impact on the beneficiaries. Beneficiaries are supposed to obtain the claim form from the bank after filing necessary information besides enclosing documents to prove that the animal is dead. GIC has specifically instructed its subsidiaries to collect only the claim form and the death certificate. In practice, insurance companies insist on submission of the following documents for the purposes of claim settlement: claim form, postmortem certificate, ear tag, photograph (3 copies) of the dead animal, and panchnama. In addition, they sometimes demand a treatment certificate from the veterinary doctor. GIC has indicated that a claim has to be settled within 14 days from the date of submission of all documents. However, it was found that not a single beneficiary had received the settlement amount within this stipulated period. The following reasons for delay were identified: non-availability or inaccessibility of a veteri- 38 nary doctor and his high fees, and non-availability of transportation. Owing to these practical difficulties, insurance companies give an extension of up to six months to produce all documents. On the other hand, the bank takes two to three weeks for initial processing and for forwarding the claim to the insurance company. Normally, the insurance company pays the sum insured to the insurer once the claim is made as per procedures. In practice, this does not always happen. For example, in Baramati Taluka of Pune district, the insurance company paid only the outstanding balance of the bank loan as claim and not the sum insured. Owing to this practice, the beneficiary is not in a position to purchase a second milch animal. Other Issues More than 67 per cent of the households depended on government agencies such as nationalized banks, DRDA, Taluka/Block Development Office (TOO/ BDO), or Village Level Worker (VLW) for information about the scheme. Local bodies constituted the next level of information disseminators. Several factors motivated the beneficiaries to accept cattle insurance. Thus, the highest number of households (32 per cent) said that "security" was a major contributory factor for insuring their cattle. Compulsory insurance in the case of IRDP/SLPP or bank financed animals was next in importance (28 per cent). A significant number of beneficiaries (22 per cent) were also motivated by cattle traders who do play a critical role in creating awareness (see Table 3). Table 3: Motivating Factors for Insuring Cattle * Some respondents mentioned more than one factor. Cattle owners face innumerable problems in getting their cattle insured. Quite often, bank branches are located in well developed villages and beneficiaries from backward and remote villages who have to make Vikalpa

5 frequent visits to banks or to TDO/BDO/DRDA offices face transportation problems. Many households have to pay a commission to middlemen. Irrespective of the economic groups to which they belong, all insured households consider valuation of their animals as high. One of the reasons for this is the cost of transporting cattle because of non-availability of good breeds in sufficient numbers locally. In addition to this, the trader's commission comes to Rs on each animal These factors have an impact on the valuation of animals. We sought the views of the insurers on the working of the cattle insurance scheme on a three point scale. On the whole, the scheme, because of its assured security, is working well as stated by more than 76 per cent of the households. Insured households have voiced several complaints against the working of the scheme. One of them is the high fee a veterinary doctor charges for health and postmortem certificates. In spite of the government fixing the fee for a postmortem certificate, the fee in practice ranges from Rs 50 to Rs 200. Many beneficiaries complained that unless they make a cash payment, it is impossible for them to get the certificate. The necessity of producing many documents is another major irritant. Conclusion Based on the study, some suggestions are given below to improve the working of the cattle insurance scheme. Insurance companies and banks should educate the beneficiaries about the benefits of cattle in surance. In order to popularize the scheme, in surance forms and publicity materials should be made available in regional languages. Periodic check-up of the cattle by veterinary doc tors and timely vaccinations and inoculations are essential. Veterinary services should be provided at affordable cost. The purchase committee constituted for the pur pose should ensure purchase of healthy and breedable cattle. It should also ensure that the price of the cattle is not unduly high. Developing cattle breeding centres would reduce the price and make available better breeds. In Gujarat, there are «two breeding centres Mehsana and Sabarkantha which are projects of the local cooperative dairy unions and subsidized under IRDP. Quick settlement of claims is essential for the suc cess of the scheme. Although GIC has simplified guidelines, they have been rarely implemented. It takes the insurer at least six months to get the claim settled. In order to facilitate quick disposal, veterinary doctors should verify and issue death certificates within a specified number of days. The charges for issuing certificates should also be fixed. The task of issuing death certificates can be assigned to veterinary doctors of the animal husbandry department or DCS. Death of the animal can be reported to the local bank rather than to the distant insurance company. At present, insurance companies limit insurance coverage to bank financed and subsidy covered cattle (see Table 4). Coverage of all milch cattle may be done under a master policy, as is being done in Rajasthan and Andhra Pradesh. Such a policy provides for uniform and low premium rates, uniform procedures, and quick disposal of claims. Insurance coverage can also be for three to five years instead of one year as is the case at present. Individually owned non-bank financed cattle should also be covered by insurance. For this purpose, it is necessary to have coordination between village level agencies, DCS, banks, insurance agencies, and state governments. The scheme introduced in Kaira district by Amul could serve as a model for the rest of the country. Table 4: Coverage of Cattle Insurance Scheme: All India Source: General Insurance Corporation. Insurance agencies claim that the cattle insurance scheme is a loss making venture. This is true as long as the mortality rate of the animal for this age group is more than 2.25 per cent. Secondary data for Surat district (Table 5) indicate that the claim rate is much higher than the general mortality rate (NDRI, 1980). This is mainly because beneficiaries file false claims of death. However, it is very difficult to substantiate this allegation. What is Vol.15, No.2, April-June

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