Inclusive livestock insurance: best practice, pitfalls and challenges

The sixth and final Expert Forum of 2018 brought together experts from Latin America, Asia and Africa to share experiences of inclusive insurance for small-scale livestock farmers. Priya Kumar, Senior VP at HDFC ERGO General Insurance in India, Mónica Baldivia, the Insurance Technical Coordinator at Fundación PROFIN in Bolivia, and Dr. Richard Kyuma, Programme Coordinator of the Kenya Livestock Insurance Program (KLIP) came together under the expert moderation of Bert Opdebeeck, Founder of Microinsurance Master.

Livestock insurance and improved livestock management is directly related to seven of the 17 Sustainable Development Goals (SDGs) - including no poverty, zero hunger, and good health and wellbeing. Livestock farming represents a significant untapped insurance market: there are 290 million small livestock farmers worldwide, collectively providing around 80% of the food in emerging economies. Their most important asset is their animals, but the vast majority are uninsured - meaning that the farmers themselves have to manage all the risks of running a livestock farm, including drought, disease, accidents and other catastrophes. However, fraud remains a challenge: as Opdebeeck pointed out, there are a lot of “van Gogh cows” still running around minus an ear which the farmer cut off in order to claim the insurance!

Priya Kumar said HDFC ERGO General Insurance is currently insuring around 5000-6000 animals a month for individual farmers, but under “scheme-based” insurance which covers all the animals in a particular province, that figure shoots up to many hundreds of thousands. Fraud is a major challenge, but is being tackled by using a foolproof ear tag which, if it is removed to be put on another animal, cannot be re-attached. Only animals which have been bought using a loan can be insured, so the insurance is linked to the loan, which is only granted after an animal has been checked over and declared healthy by a vet. In addition, the vet has a smartphone app which records all the data of a particular animal - including photos and 360 degree video - which is stored on a database for checking in the case of a claim to make sure the dead animal really is insured.

Fundación PROFIN is a Bolivian not-for-profit organisation which promotes the economic and productive development of Micro, Small and Medium Enterprises (MSMEs) by researching and promoting financial and insurance innovations for development. Mónica Baldivia presented Profin’s dairy livestock insurance scheme, which brings together a bank, an insurance company, farming families, reinsurers and veterinary experts. At the heart of the scheme is an innovative call centre which dairy farmers can use to get technical assistance and to answer general questions about improving the health of their herd. Loans from the bank come with an insurance policy which covers events such as diseases, accidents and natural disasters, which guarantees that both the animal and the loan are protected. Just as in India, the insured cattle have tamper-proof ear tags to prevent fraud, and an agricultural expert appointed by the bank records data for each the individual animal - although as yet this is done manually rather than through a smartphone app. So far, 1462 heads of cattle have been covered by 653 policies, with a total sum insured of US$1.4 million.

KLIP’s Dr. Richard Kyuma began by describing the plight of pastoralist livestock farmers in Kenya, where losses caused by drought in 2008-11 amounted to a staggering US$10 billion - 70% of which was in the livestock sector. KLIP was set up as a partnership between regional government, insurance companies and the farming communities to cushion and protect pastoralist livestock farmers from the affects of drought, and so far the programme has paid out US$7 million to farmers in just two years. The premiums are 100% subsidised by the government - in other words, the government pays the premium on behalf of the farmers - but the aim is to encourage farmers over time to pay some or even all of the premium themselves as they begin to see the advantages of having insurance cover. Payments are triggered automatically using satellite images to calculate when grazing cover falls below a pre-determined threshold. Payments are transferred directly into farmers’ mobile money wallets, usually within a week. In the two years 2016-17, more than 33,000 farmers received payments totalling nearly US$7 million, and this year alone more than 18,000 farmers have benefitted. These numbers, said Kyuma, showed the potential for commercial insurance operators entering the market.

All three experts agreed that their schemes had the potential to be financially sustainable in the future, although considerable challenges remain.

Members can download a recording of the Expert Forum in full from our members’ area. We hope you can join us for the next series of Expert Forums in 2019!