MR Microinsurance_2012_03_29.indd - International Labour ...

Table 12.4
268 General insurance
Index-based insurance experiments for livestock insurance
Country Scheme or type of insurance Salient features Service provider
Mongolia Death cover Index-based product for Risk-layering by cattle
migrating population durrearers, insurers and govern-
ing harsh winters based on
historical mortality rates
ment
Kenya Cover for catastrophic Index-based product against Pilot by private insurers
events like drought, which drought and other weather with the support of the
impacts fodder
phenomenon using NDVI International Livestock
Research Institute
Mongolia was the fi rst to pilot an index-based insurance product for
livestock that covered substantial losses due to extreme winters (see Box 12.3). In
January 2010, the second index-based livestock insurance product was launched
in the Marsabit district of northern Kenya and was aimed at providing insurance
cover for livestock mortality due to a prolonged lack of forage (Mude et al.,
2010). Th e Marsabit index is derived from a satellite-based normalized diff erenced
vegetation index (NDVI) series that summarizes the state of rangeland
forage availability. More than 1 000 livestock were insured during the period to
May 2011.
Both of the projects are still in their experimental phase and need datasets to
substantiate the success stories. Moreover, index-based livestock insurance might
be eff ective in semi-arid zones but its application to areas with more complex,
multi-activity agricultural production might not be possible. Th e jury is still out
on the eff ectiveness of this solution if no subsidies are received from the Government.
Community-based model
While there are few experiments around the globe to test and verify community-based
models for livestock, their potential benefi ts cannot be neglected.
Th e Livestock Protection Scheme (LPS) running in Andhra Pradesh, India is
one example. Th e programme was successful in reducing fraud through community
supervision and vigilance (Sharma and Shukla, 2010). Th e programme
managed to keep the total delivery costs down and achieved signifi cant outreach
(see Table 12.5). Close monitoring with strong community ownership
resulted in reduced fraud, helped to build trust among community members
and was instrumental in increasing enrolment. However, the scheme is selfinsured,
which might become a problem if mortality increases and, as with
many community-based schemes, it might run into governance problems
when a larger scale is achieved.