Pashu-Dhan Bima: Livestock Insurance by ITGI (Research, Monitoring and Evaluation)

Qualitative Study (4th-8th October, 2010)

Centre for Insurance and Risk Management, IFMR

10/20/2010

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Table of Contents

1. Introduction ............................................................................................................................. 2

2. Qualitative Research ................................................................................................................ 2

2.1 Instruments ............................................................................................................................ 2

2.2 Sampling ............................................................................................................................... 2

3. The Insurance Product and its performance ............................................................................ 3

4. Outcomes of the Qualitative Study .......................................................................................... 4

4.1 Major Points of Discussion ................................................................................................... 4

4.2 The FGD Outcomes .............................................................................................................. 4

Conclusion ...................................................................................................................................... 9

Annexure ....................................................................................................................................... 10

Annexure 1: Discussion Guide ................................................................................................. 10

Annexure 2: List of Villages where FGDs were conducted ..................................................... 13

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1. Introduction

IFFOC TOKIO General Insurance Co. Ltd. (ITGI), a private insurer in India has offered RFID

(Radio frequency identification device) based tags for identification of the insured cattle. The

project started in the year 2009 and the insurance cycle has completed one product cycle in the

months of August-September 2010.

The qualitative study was targeted to get some insights into the product features and related

customer perception of various process features as well. The qualitative study was conducted in

the villages of Mehsana district, Gujarat during the period from 4th

to 8th

of October, 2010.

Qualitative study was conducted to get farmer’s feedbacks with respect to the following research

question:

“What is a perception of the new RFID product by cattle owners? How does the introduction of

the RFID technology improve value from livestock insurance for cattle owners (premium

reduction, quicker claims settlement, lower veterinarian costs)?”

2. Qualitative Research

2.1 Instruments:

For the qualitative study, focussed group discussions were used as the instrument. Total of 10

such focussed group discussions were conducted. 6 of such discussions were conducted in the

villages where RFID tags were used to identify the insured cattle. 3 of such discussions were

conducted in villages where only plastic tags were used to identify insured cattle. One of the

discussions was also conducted

The initial plan to conduct 11 FGDs did not fructify as one of the villages where ITGI had

offered both RFID and plastic tags to identify insured cattle, did not co-operate in conducting the

discussion. Hence, only 10 FGDs were conducted.

2.2 Sampling:

During FGDs we made sure that farmers participating in the discussion represent of all type of

farmers who have livestock as primary and secondary source of income (like large dairy farmer,

small/marginal dairy farmer, farmer with huge land who has livestock as secondary source of

income during lean period). Farmers with different categories of land holding (ranging from 1

acre to 70 acres) participated in the discussions. Also, farmers with varied numbers of cattle

ownership (ranging from 1- 16 cattle) participated in the discussions as well.

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3. The Insurance Product and its performance

The “Pashu-Dhan Bima” cattle insurance product is being implemented to test the process

innovation of introduction of RFID tags to identify the insured cattle. The premium charged in

this case ranges from 3.5 to 4 per cent of the sum assured (value of the cattle). The insurance

product is offered as a “credit linked” product, where in the farmers/ cattle owners who have

availed credit from the Co-operative Bank are insured.

ITGI uses the network of “Bima Kendras” (one manned micro offices) of IFFCO TOKIO

Insurance Services Ltd., which is 100% subsidiary of ITGI and acts as the corporate agent of

ITGI for marketing the insurance products. The Bima Kendras are manned by “Bima Sahayaks”

(Relationship Executives) who educate the village co-operative society staff and the farmers

about the product at the time of enrolment of the cattle. All the insurance related brochures,

claim process documents etc. are made available at the village co-operative society office so at to

make the access easy for the farmers.

Registration Process:

The “Bima Sahayaks” along with a veterinary doctor inspect each and every cattle before

insurance. The RFID tagging is done by veterinary doctor in presence of “Bima Sahayaks”. The

RFID capsule is injected in the auricular (ear) region of cattle’s body. After injecting the RFID

capsule, the “Bima Sahayaks” captures the tag number by reading the same using the RFID

reader. He then explains the process of identification, process for claim settlement to the

household and also demonstrates the identification number reading before them. He then takes a

photograph of the animal to identify the animal and the veterinarian issues health certificate of

the cattle.

Claim Process:

At the time of claims, the claimant farmer has to inform the “Bima Sahayaks” about the death of

the cattle. Upon receipt of information about death of the cattle, the “Bima Sahayaks” visits the

site and inspects the carcass. He identifies the cattle using the RFID reader and certifies death of

the cattle after establishing the identity using the RFID tag number. The cattle owner also has to

submit a “Post Mortem” report, issued by a practising veterinarian along with two photographs

of the animal. The normal claim settlement process under this system takes about 15 days

because of the process improvements such as RFID identification, physical verification by

insurance advisor and lesser documentation hassles.

Performance:

In the first year of the product cycle, the product covered 629 cattle (with 394 RFID tags and 235

plastic tags). Out of this insured cattle population, 11 death claims have been received for

insurance pay out. A total of 9 claim cases have been already paid and 2 of the claim cases (one

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each from Kuda and Mokasana villages) are under settlement process. An interesting observation

was that all the claims received for insurance payouts are for the cattle tagged with RFID tags.

4. Outcomes of the Qualitative Study

4.1 Major Points of Discussion

The FGDs were directed to get the feedback of cattle owners who were insured into the “Pashu-

Dhan Bima” scheme about various aspects of the product features and process features. The

main points of exploration are as follows:

Dependence of household on livestock as source of income.

Problems/ challenges in rearing livestock.

Risk attitudes of the cattle owners, their past experience.

Product and process literacy (awareness about the product).

Benefits of RFID in improving the livestock insurance process.

o Ease in documentation for enrolment/ registration

o Claim management

Source of information about the insurance product and RFID.

Renewals of the policy due to reduced premiums.

Product feedback.

As part of the qualitative study, product attribute ranking was also performed by the farmers who

participated in the FGDs and also Venn diagram was used to map the institutional resources

which are at disposal to the farmers.

4.2 The FGD Outcomes

General Observations:

Most of the farmers responded to have livestock rearing as the secondary source of income (less

than 25 per cent of total income). Only in cases where the cattle owner has herd size of more

than 10-12, livestock accounted for major portion of the family income (primary source of

income). But, one important idea which emerged from the discussions was that because the cash

flow from livestock rearing is continuous (except in the dry period), the preference for livestock

is very high. Also, the mutuality between livestock rearing and agriculture helps farmers to use

the residues of one into the other.

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With respect to the problems faced in livestock rearing the major concern for farmers was

availability of water during summer months (in Kuda village). Elsewhere farmers responded that

as such they do not face any significant challenge in rearing. They also pointed out that as most

of the breeds which they rear are indigenous, such breeds can withstand some of the challenges

such as water scarcity, hot summers (normal temperature range in the area was around 45 degree

Celsius) and few diseases as compared to cross breed cattle. Fodder availability was not a

challenge as the farmers also cultivated some land and thus were able to use the leftovers of the

crops as fodder.

Veterinary care services were also readily available to the farmers; either through the veterinary

services provided by the Village Dairy Co-operative or through the private practitioners

(Veterinarians). So, farmers were of the opinion that health care services for the cattle were not a

significant challenge for the farmers. Heavy rains during this season monsoon caused floods.

Risk Attitude:

Overall the risk attitude of farmers was much skewed towards the risk management solutions

which were readily available to them, such as social networks (within the villages/ with relatives)

and the services provided by village level institutions (Dairy Co-operative per se). To add to that,

they did not perceive the risks associated with cattle rearing as significant risks to them.

Risk reduction facilities such as vaccination and de-worming were made available to the cattle

through the network of Village Dairy Co-operative. Also, farmers usually attend the awareness

campaigns organised by the Dairy Co-operative (currently there is a lot of thrust on Clean Milk

Production and thus more of such meetings are being organised).

Insurance of the cattle does not carry very high value to the farmers as a risk management tool.

The existing cover was provided to them because it was a mandatory credit linked insurance

cover. Otherwise, farmers do not perceive much value in cattle insurance voluntarily. With

respect to the cattle insurance provided by ITGI, in villages where RFID tags were used for

identification, farmers were of the opinion that this is a unique system to identify the cattle. They

were excited because the injection of RFID capsule causes lesser pain to the cattle as compared

to ear-piercing plastic or brass tags. But, in the two cases, where claims are under process due

non-receipt of RFID tag readings, farmers were critical of the system. They had complains

related to non-payment of claims during the promised time-frame (15 days).

In villages where plastic tags were used for identification of animals, farmers had complains

about durability of the plastic tags. In Ganget village, 3 farmers categorically pointed out that

plastic tags are lost by cattle while grazing or broken in case cattle fight with others and thus are

non-durable.

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Awareness:

Farmers had a good sense about the product features. The most important aspects which they

highlighted were the registration process and the claim information process. The engagement of

the “Bima Sahayaks” and the empanelled doctor during the entire processes, from registration to

claim settlement, and their visits to farmer households made them feel valued.

Farmers also pointed out at the use of RFID tags and their ability to see the tag numbers when

readings were taken by the RFID reader device.

Only in case of the two pending claims, farmers had complains related to delivery issues.

They pointed out that at the time of inspection of the carcass, the RFID reader did not

produce any readings and thus, their claims were not being paid. Otherwise, even they

were satisfied with the processes which are being followed from registration to claim

management.

Past Experience:

When asked about their previous experience with cattle insurance, farmers in all the FGDs

pointed to the delay in claim settlement and claim pay out. In those cases where claim payouts

were made by ITGI promptly (9 cases, 4 from the village Kuda), people praised the product and

process features in making speedy claim payouts. They also highlighted the issue of unawareness

about the product features in case of their previous experiences with cattle insurance. In the

present intervention, “Bima Sahayaks” had explained the product features and the claim

settlement process to the Chairman of the Village Service Co-operative Society and the farmers

whose cattle were insured.

Only in the two cases where the claims payout was delayed (in Kuda and Mokasana

villages) due to non-receipt of RFID tag readings, farmers were of the opinion that the

plastic/ metal tags were much better as the farmer could visibly ascertain the tags. In

present case, the farmers do know which animal was tagged by RFID tags.

In the village where farmers had refused to avail the cattle insurance offered by ITGI, the

perception was that cattle insurance does not carry much value for them. They had refused to

avail insurance because they were not willing to pay for the premium voluntarily and also their

past claim experiences with other insurance company was very bad.

Marketing and Renewals:

Farmers across all villages (where FGDs were conducted) had information about the cattle

insurance offered by ITGI. This clearly indicated that people were exposed to information about

the product from some external source. The “Bima Sahayaks” of ITGI were responsible for the

spread of information about the cattle insurance product offered by ITGI.

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When asked about renewals, farmers were of the opinion that cattle insurance does not carry

much value to them as a risk management tool. Some also pointed out towards unavailability of

cash with them (liquidity) to pay for the premiums. As the present insurance product is credit

linked, farmers do not have to make premium payment from their pocket but the same is debited

from the loan account. Even with introduction of the idea that premiums would reduce for

subsequent renewals, farmers did not show interest in renewal of the insurance policy.

Product Attribute Ranking:

In the villages with RFID tags for identification of cattle (six villages) farmers gave top rankings

to four major aspects of the product i.e. enrolment process, technology (RFID), claim settlement

process and claim settlement time. The following table presents the product attribute rankings

assigned by different groups:

Table 1: Product Attribute Rankings

Enrolment

Process

Mode of

Premium

Payment

Premium

Amount

Coverage Technology

(RFID)

Claim

Settleme

nt

Time

Claim

Settleme

nt

Process

Kuda 1 - - - 3 2 4

Kuvasana 3 - - - 4 2 1

Pratapgarh 4 - - - 2 3 1

Mokasana 1 - - - 2 4 3

Fuletra 4 - - - 3 2 1

Vinayakpur 3 - - - 2 4 1

Denap 1 - - - - 3 2

Khakhadi 1 - - - - 2 3

Ganget 1 - - - - 2 3

Deusana Did not participate in the Product attribute ranking.

Source: PRA Exercise.

In the villages with RFID tags, higher rankings were assigned to claim settlement process

because of the positive experience of the farmers. Farmers explained that they faced less of

hassles in the claim settlement process and were aware about how and whom to inform in case of

death of the cattle. Farmers in these villages did not rated three attributes i.e. mode of premium

payment, premium amount and coverage of the product because the premium was debited from

their loan account and so they did not have any idea about the premium and its mode of payment.

Also with respect to coverage under the insurance, farmers were not able to differentiate with

other products from their past experience, so they did not rank this attribute as well.

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In the three villages where plastic tags were used, farmers ranked only three out of seven

attributes of the insurance product (enrolment process, claim settlement time and claim

settlement process). As they were not exposed to the RFID technology, they did not respond with

respect to technology aspect in product ranking. In all the three villages, farmers assigned first

rank to enrolment process and in two villages they assigned second rank to claim settlement

time. In the village where the ITGI cattle insurance product was not offered, people were not

able to perform product ranking as they had no experience about the product.

Venn Diagrams:

Venn diagram was used to ascertain the relevance of various institutions or facilities available in

the village, or which the farmers access, which are beneficial to the cattle owners. Initially,

farmers identified the institutions that they frequently interact with in relation to cattle rearing

and then used Venn diagram method to ascertain the relative importance of those facilities or

institutions. The following table represents the institutions identified by the farmers:

Table 2: Institutions beneficial for cattle owners

Institutions present in the Village Institutions outside Village Boundary

Dairy Co-operative Society Cooperative Banks, Nationalised Banks

Primary Agriculture Co-operative Society

(PACS)

Private Veterinarian

Moneylender Government Veterinary Hospital

Dairy Union

Source: PRA Exercise.

In all the villages, the Village Dairy Co-operative Society was the most valued institutions from

farmers perceptive. As the Dairy Co-operative Society was responsible for delivery of many

services to the farmers, they attribute high value to it. Even the Primary Agriculture Co-operative

Societies in all the villages assumed high value for the farmers. Inside the village, local money

lender was an entity which supported them in time of emergencies and provided financial

assistance as and when needed, it also assumed a good value for the farmers.

Banks and private practising Veterinarians assumed high importance among the institutions

which were outside the village boundary. Farmers also accorded importance to Government

Veterinary Hospital, as in case of emergencies related to cattle health, they had to resort to its

services. Dairy Union was also given due importance as many of the services were provided to

cattle owners through it. These services included veterinary support including vaccination etc.,

insurance of cattle, provision of cattle feed etc.

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Conclusion

The qualitative study revealed many aspects about the product features and people’s

perception about using RFID for identification of cattle. The most interesting factors which

emerged from the study are that the improved process of enrolment and claim settlement

process were very much favoured by the farmers. Farmers had praises about the RFID

tags in places where claims were settled in time and payouts were made. Where ever the

technology failed to deliver the results (because of technological glitches), farmers showed

scepticism about RFID.

Farmers, overall, were very positive about the transparent process from enrolment to claim

settlement. The reduction in claim settlement time (to an average of 15 days) was an

achievement of introduction of RFID and improved processes followed by ITGI.

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Annexure

Annexure 1: Discussion Guide

General:

How much do you depend on livestock as a source of income?

o Primary or Secondary source (secondary means when per month income is less

than 25% of total income but more than 10%).

What are the major problems faced by livestock in the area? (give hints if people are

not able to understand the question otherwise let them decide it)

o Low value of cattle and low productivity

o Feed and fodder

What kind of fodder is available in the area?

Dry Fodder (crops)

Green Fodder (cropped or grazing)

If they buy it from somewhere-

How far is that place?

What is the approximate price/quintal?

o Diseases

Normal mortality rates (Buffalo, cattle)

Major diseases in the area due to which mortality happens or

productivity decreases that impact the livestock

Any major epidemics in past 5 years

o Water: Scarcity or water borne diseases due to unhygienic conditions

o Environment: High temperature, shelter and other related problems

o Credit crunch: for buying better quality animals or for insurance

o Any other: Note down if we have missed that in above list!

Specific:

Risk attitudes o What do you think is the best way to reduce risk for all of these problems? (Get

opinion- See what options they tell. Capturing Risk Management solutions

available/wished by cattle owners)

o Steps taken by people to control risks (see which one the most sought after

option)

Risk Reduction: Vaccination (name the diseases, when are the

animals vaccinated) and De-worming (when and for which

diseases)

Risk Transfer: Taking insurance (check if it was voluntary or

mandatory product)

Awareness: Attending hygiene camps by govt/dairy-coop

Do nothing and bear the risk

o Tell us about ITGI insurance program

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Get details- components of insurance program

How useful it was in reducing the risk faced by livestock?

Awareness

o Product literacy

What are the important features of ITGI product? (Understanding of the

product and its features). Can be compared with product note.

o Process literacy Describe the enrolment process?

Describe the claim settlement process?

Are there any service delivery issues, if any

Past experience o Did you buy any other policy earlier? What was your experience? Did you use

plastic tags for your animal identification earlier? Were you happy with it?

o Was ITGI better than previous experience with insurance?

Opinion on premium and its payment

Opinion on coverage (was it what they want- value-wise and product

features wise)

Opinion on registration process

Opinion on marketing of the product

Claims settlement experience

Can you tell us how it benefitted you?

Renewals- how many will do the renewals

o Why have you not opted for the scheme? (for group who did not buy the policy)

Provide specific reasons

Product feedback

o Key features of the product liked and disliked by members

If you wish to re start the scheme what will you change in it? (What changes would you

like in the present scheme that will induce you to buy the product?)

Miscellaneous

Marketing

o Did anybody inform you about the product ( to capture understanding of

product)

Know-how o Do cattle owners know that they can use the same ear tag number for next year

policy too?

Renewals o Will cattle owners buy the LI product again as due to RFID will help to reduce

the premium amount (given that fraud cases will go down and hence will have

positive impact on premium)?

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PRA Tools:

1. Product Attribute Ranking

Criteria/component Rank Comments

Enrollment process

Mode of premium payment

Premium Amount

Coverage

Technology (RFID)

Claim Settlement Time

Claim Settlement Process

2. Venn/ Chapati Diagrams

Looking at various facilities available at village level and their perceived benefits by

cattle owners

Some of the important facilities are: Money lender (for credit to buy the product), Vet

Services, Banks, MFI-NGOs, Dairy Co-operatives, Agro-advisory services, etc.

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Annexure 2: List of Villages where FGDs were conducted

Serial No. Name of the Village Type of Tag Used No. of Participants

1 Kuda RFID 12

2 Kuvasana RFID 10

3 Pratapgarh RFID 6

4 Mokasana RFID 10

5 Fuletra RFID 10

6 Vinayakpura RFID 10

7 Denap PU 10

8 Khakhadi PU 10

9 Ganget PU 10

10 Deusana No Insurance Offered 10