AN ECONOMIC ANALYSIS OF CATTLE INSURANCE IN SELECT DISTRICTS OF KARNATAKA
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Date
2019
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Publisher
ICAR-SRS, BENGALURU
Abstract
Livestock is one of the important productive assets in the rural areas in India. But this
vital economic asset is most prone to several risks and uncertainties. So, an effective insurance
mechanism is essential for the farmers to cope with the household related shocks. There are a
few studies on the livestock risk management strategies and depiction of farmers who adopt the
insurance in India. The study is more imperative keeping in mind the benefits of the livestock
insurance especially, small and marginal farmers against any eventual loss to their animals, but
these issue need critical analysis, hence the study “An Economic Analysis of Cattle Insurance
in Select Districts of Karnataka” was undertaken with the specific objectives to analyse the
status, factors influencing and assess the willingness to pay for cattle insurance, its influence on
dairy farmers and to identify the constraints in cattle insurance. The data was collected from both
primary and secondary sources. A total sample of 240 dairy farming households comprising 80
each from Kolar, Shivamogga and Dharwad districts representing Southern, Malnad and
Northern regions of the Karnataka, respectively were considered for the study. The sample was
post-stratified into insured and non-insured of cattle insurance. The study employed suitable
descriptive statistics including, Z-statistics, Mann-Whitney U-test, Compound Annual Growth
Rate (CGAR), Binomial Logit Model, Contingent Valuation Technique, Multiple linear
regression, Censored Tobit Model, Cost & return analysis, Standard treatment effects model and
Henry Garret Ranking Technique. The results showed that number of animals insured under
National Livestock Insurance (NLM) scheme in Karnataka between periods (2006-18) grew
from 9487 to 2,36,332 with CAGR of 28.52 per cent. The claim to premium percentage varied
from 20 to 81 per cent. Number of animals insured was found to be higher under Cattle Group
Insurance scheme (26,278 to 37,477) than NLM scheme (970 to 7360) in Kolar district between
periods (2015-18). The lowest claim to premium percentage was observed in Dharwad (13 to 25
%) under NLM scheme. In the study area, around 41 per cent of the farmers adopted cattle
insurance and it was highest in Kolar (66.25 %) followed by Shivamogga (40.00 %) and with a
lowest in Dharwad (17.50 %), which covered 18.48 per cent of total milch animals, which was
highest in Kolar (37.50 %) followed by Shivamogga (14.02 %) and Dharwad (9.46 %) districts.
The majority of animals insured were crossbreds (86.42 to 87.50 %), followed by buffalo (8.33
to 10.00 %) and indigenous cattle (4.17 to 5.00 %) across the districts, owing to high market
value and better milk yield potential of the crossbreds. The age of the respondent, type of animal
reared, herd size and membership in dairy cooperatives and districts had significant influence on
adoption of cattle insurance. The education of the respondent, herd size, type of animal holding
and membership in dairy cooperative significantly influenced willingness to pay for cattle
insurance. Willingness to pay was found to be less than the actual payment for the cattle
insurance premium, and it was more in the case of crossbreds than other categories of animals.
Type of animal and membership in dairy cooperatives had positive and significant influence on
actual level of payment for cattle insurance. In general, net cost of milk production was more in
the case of insured herd as compared to non-insured herds. Higher net returns were observed for
insured herd in Kolar district (₹ 6.72 per litre) for crossbreds. The mortality cases were higher in
Shivamogga (42.52 %) but animal insured to total mortality percentage was only 16. 67 per cent.
The highest mortality cases indicating high risk were found in crossbreds (41.18 to 92.31 %)
followed by indigenous (5.13 to 29.41 %) and buffaloes (2.56 to 29.41 %) across the districts.
The claim settled to claim lodge percentage was 91 per cent in Kolar district, which was the
highest. The land holding size, animal herd size, non-farm occupation along with dairying had
positive influence and the loss of animal had negative influence on net- income of the farmers.
The major reason for not insuring cattle was high premium and complexity in the procedure for
claiming of insurance. Constraints faced by the farmers in adopting cattle insurance were lack of
awareness about rules and regulations, insurance not covering losses other than death, animals
not insured at actual market price and tedious procedures in completing the formalities in filing a
claim. Difficulty in arranging the documents for the insurance and claiming insurance money and
non-adherence of dairy farmers to the rules and regulations of cattle insurance were major
constraints faced by the cattle insurance agencies. It is concluded from the study that only a
small proportion of the animals were insured indicating that there is need for educating farmers
regarding the benefits of cattle insurance. There is need for simplification of the procedure for
claim settlement and provide detail awareness about insurance. Finally, it can be concluded that,
cattle insurance is one of the best risk mitigation strategies to help the farmers in stabilizing their
income under risks and uncertain situations.