esada 2012. livestock insurance best practices / lessons learned john mackillop land olakes...
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ESADA 2012
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Livestock Insurance
Best Practices / Lessons Learned
John MacKillopLand O’Lakes International Development DivisionDairy / Livestock Practice Manager
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Risk Management
- Agriculture is a high risk business
Property risk Liability risk Market risk
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Useful Definitions
- Actuary
- Underwriting / Coverage
- Premium
- Indemnity / Pay out
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Livestock Insurance
- Types of losses- Frequency and severity of losses- Risk characteristics of individuals- Value of loss- Affordable product- Insurance fraud
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Requirements for Insurance
- Identification, Ear Tag
- Health Certificate Adequate housing Adequate feed Free of parasites Current with recommended vaccinations
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Cost of Insurance
- Depends greatly on historical data- The size of the insurance package- Greater risk you accept, lower the cost
- Examples Malawi 5.1% of value of cow Zimbabwe 2.5% India 3.5% to 4% Kenya Marsabit 3.25% - 5.5% US 2.5% or $33/cow for farm insurance
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Insurance Claim
- Livestock claim form- Veterinary certificate- Treatment chart- Post – Mortem report- Valuation certificate- Photographs- Police report, if applicable
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Insurance coverage
- Is it covered?
Negligence / Manageable events
Uncontrollable event / natural hazard
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Sudan livestock insurance
Loss Ratio 1998 – 2003 (claims/premium)
1998 – 10.23%1999 – 76.13%2000 – 103.03%2001 – 113.19%2002 – 57.12%2003 – 13.52%
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Index based livestock insurance
- Premiums and indemnity based upon an event (drought) occurring which leads to loss of livestock
- Strike point (index)of insurance activation
- Monitor index not individual loss
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IBLI Example
- 10 TLU valued at Ksh 120,000- Insurance premium Ksh 3,900 (3.25%)- Strike point is 15%- Data index prediction is 13%
- Date index prediction is 25%- 25% minus strike point 15% = 10% payout- Indemnity payout Ksh 12,000
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Challenges
- Penetrating new markets is expensive
- Distribution channels undeveloped
- Farmer education, high priority
- New products and bundle products