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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 im-
pact on the owner's income, more so if the owner hap-
pens 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, cal-
ves/heifers reared under special programmes and bul-
locks 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 Develop-
ment Programme (IRDP).
The cattle insurance scheme was initiated through
the Small Farmers' Development Agency (SFDA) in
1971. But the scheme itself got a fillip only when nation-
alized 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 1983. 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 1978-79, IRDP is the single largest anti-
poverty 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 1990 35

opportunities to the rural poor and gives special
priority to underprivileged communities. Its benefi-
ciaries 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 consider-
ably 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 in-
surance has been made compulsory for all IRDP-as-
sisted milch animals (Shenoy, Raju, and Acharya, 1987).
Cattle insurance under IRDP provides the follow-
ing advantages: low premium rates, extra coverage for
age, and simple procedures for insurance and claim
settlement. The broad terms and conditions of the in-
surance scheme are as follows: milch cows, milch buf-
faloes, 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 dis-
ability 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 dis-
ability 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
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 govern-
ment 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 pur-
chase 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 ex-
tension officer of the District Rural Development Agen-
cy (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 prac-
tice, 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. Interesting-
ly, the purchase committee members in Pune district
felt that their presence was not essential at the time of

36 Vikalpa
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
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 dif-
ferent 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, con-
sumption 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. Informa-
tion 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 hand-
icapped during the policy period whereas the
IRDP/SLPP beneficiaries' cattle are excluded from this
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 docu-
ments 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 docu-
ment 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 1990 37
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 com-
pulsion. 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 follow-
ing documents for the purposes of claim settlement:
claim form, postmortem certificate, ear tag, photograph
(3 copies) of the dead animal, and panchnama. In addi-
tion, 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 docu-
ments. However, it was found that not a single benefi-
ciary had received the settlement amount within this
stipulated period. The following reasons for delay were
identified: non-availability or inaccessibility of a veteri-
nary doctor and his high fees, and non-availability of
transportation. Owing to these practical difficulties, in-
surance 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 in-
sured 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 posi-
tion 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 house-
holds (32 per cent) said that "security" was a major
contributory factor for insuring their cattle. Compul-
sory 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 get-
ting their cattle insured. Quite often, bank branches are
located in well developed villages and beneficiaries
from backward and remote villages who have to make
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 150-250 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.
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 Sabarkan-
tha — 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 hus-
bandry 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, in-
surance 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 dif-
ficult to substantiate this allegation. What is

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