ESADA 2012

Livestock Insurance

Best Practices / Lessons Learned

John MacKillopLand O’Lakes International Development DivisionDairy / Livestock Practice Manager

Risk Management

- Agriculture is a high risk business

Property risk Liability risk Market risk

Useful Definitions

- Actuary

- Underwriting / Coverage

- Premium

- Indemnity / Pay out

Livestock Insurance

- Types of losses- Frequency and severity of losses- Risk characteristics of individuals- Value of loss- Affordable product- Insurance fraud

Requirements for Insurance

- Identification, Ear Tag

- Health Certificate Adequate housing Adequate feed Free of parasites Current with recommended vaccinations

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

Insurance Claim

- Livestock claim form- Veterinary certificate- Treatment chart- Post – Mortem report- Valuation certificate- Photographs- Police report, if applicable

Insurance coverage

- Is it covered?

Negligence / Manageable events

Uncontrollable event / natural hazard

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%

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

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

Challenges

- Penetrating new markets is expensive

- Distribution channels undeveloped

- Farmer education, high priority

- New products and bundle products