Make Cattle Insurance More Profitable
RFID Based Cattle Insurance/Livestock Management
This proposal from MetaSparc is to provide RFID (Radio Frequency Identification) technology based Cattle/Livestock Insurance management services for Insurance companies. The proposed software system is user friendly, easy to use, reduces the fraudulent practices while managing the Cattle Insurance.
What is RFID: Radio-frequency identification (RFID) is an automatic identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. An RFID tag is an object that can be applied to or incorporated into a product, animal, or person for the purpose of identification using radio waves. Some tags can be read from several meters away and beyond the line of sight of the reader.
The RFID Implant tag/chip can be implanted in animals according to ISO (International Organization of Standardization) 11784, 11785.
Need for insurance:
Cattle are delicate animals. They suffer from many diseases, accidents, etc. If the death occurs to animals due to these causes, there is tremendous loss to the owner of the animal or dairyman. But if there is insurance of the animal the owner gets some compensation and his loss is shared by the insurance company.
What is insurance?
It is a service offered by a insurance company to protect owners of animals (cow, buffalo or bullocks) from any natural hazards (diseases, accidents, poisoning, etc.) and provide compensation to the owners of the animal when loss occurs in lieu of small regular payments to the company called premium. Through insurance, big losses befalling on few cattle owners are shared by the insurance company and the owner is protected.
Condition of animal:
The animal to be insured should have good health and free from any disease or illness. The veterinary doctor has to examine the animal thoroughly and certify accordingly. This certificate has to be attached to the insurance proposal. Animal should be vaccinated to protect from occurrence of any disease and care should be taken to feed properly with balanced diet to maintain good health. There should be no hunger and food deficiency. Old animals are not insured. Animals which have good health and free from sickness have higher price and hence can be insured at higher value. Consequently, they can earn higher compensation to the owner.
Documents Needed:
Following papers are to be submitted with insurance proposal.
- Insurance proposal containing name of animal owner, his address branding number of animal, identification mark, breed, sex, age, colour, horns, height, etc.
- Certificate by veterinary doctor in the prescribed form.
- Receipt of payment made while purchasing the animal.
- Certified value of animal considering its age, sex, health, etc. at the time of insurance.
- Photo copy of the animal.
This proposal is to be made with the help of veterinary doctor.
Livestock Insurance
Livestock insurance is provided by public sector insurance companies and the insurance cover is available for almost all livestock species. Normally, an animal is insured up to 100 per cent of the market value. The premium is 4 per cent of the sum insured for general public and 2.25 per cent for Integrated Rural Development Programme (IRDP) beneficiaries. The government subsidizes premium for IRDP beneficiaries. Progress in livestock insurance, however, has been slow and poor (Table 5.9). In 2004-05 about 32.18 million heads were insured which comprised 6.58 percent of livestock population.
Progress of livestock insurance
| Year | Number of animals insured (millions) | % livestock population insured |
| 1988-89 | 18.60 | 4.20 |
| 1992-93 | 13.80 | 2.90 |
| 1997-98 | 22.83 | 4.70 |
| 1998-99 | 23.50 | 4.84 |
| 1999-00 | 17.10 | 3.52 |
| 2000-01 | 15.35 | 3.16 |
| 2001-02 | 16.49 | 3.40 |
| 2002-03 | 29.40 | 6.09 |
| 2004-05 | 32.18 | 6.58 |
Limitations Causing Loss:
Ø Correct and reliable information of animals to be insured not given. There are some social elements interfering in the work of cattle insurance.
Ø While making claims of compensation, all needed documents are not supplied by the animal owners and hence disbursement of claims is delayed.
Ø Showing the same dead cattle at multiple insurance providers to do wrong claims
Ø Difficulty in comparing the dead cattle with the picture of the live cattle taken during the Insurance registration
Some Historic Statistics about Cattle Insurance:
| Year | No. of Animals Insured (Millions) | Premium Collected in Rs Cr. | Incurred Claim Amount Rs Cr. | Claims to Premium Ration |
| 1995 – 96 | 15.3 | 113.39 | 74.05 | 65 |
| 1996 – 97 | 14.7 | 112.54 | 74.83 | 61 |
| 1997 – 98 | 6.3 | 143.45 | 80.11 | 56 |
| 1998 – 99 | 7.9 | 152.02 | 126.08 | 83 |
| 1999 – 00 | 9.8 | 137.14 | 114.28 | 83 |
| 2000 – 01 | 7.9 | 145.53 | 127.97 | 88 |
| Average | 10.31 | 134.01 | 99.55 | 72.6 |
The biggest challenge for Cattle Insurance companies is identifying the insured cattle at the time the cattle owners claim the death of cattle. Due to lack of proper authentication mechanism there are lot of fraudulent practices generating major loss for Insurance companies.
MetaSparc’s Livestock/Cattle Insurance Authenticator
MetaSparc provides an authentication solution for Insurance providers to identify each cattle at any given stage once the insurance is done. MetaSparc software system allows the cattle to be tagged with what ever relevant information needed to be managed in the RFID chip. The chip will contain a Unique IDentification number (UID). Once the cattle are brought for insurance the chip will be injected using an injector under the skin of the cattle. The UID will be registered in the Authentication database by having the rest of the insurance details about the cattle. If the Insurance provider is having an existing Insurance application then the Insurance policy number can be given in the Authentication system for a UID to Insurance policy number mapping. Once the tagging information is mapped by UID, Policy number mapping in the database the cattle can be tracked and compared against when a claim occurs.
The UID tag number into the chip can be written only once and can be read many times from the chip, this type of chip is commonly referred as WORM (Write Once Read Many). It will be extremely difficult for cattle owners to tamper it and any tampering effort would potentially lead to loss of coverage. Any cattle which is bought to Insurance Company for a claim will be examined with the help of a RFID Reader to sense the Chip’s UID number and will be compared against the database of the Insurance company. If a match occurs then the insurance policy coverage will be executed. The current technique of external plastic, metal tags can be easily be transplanted to any other cattle for a fraudulent claim, but using this Chip technology it is extremely difficult to remove and inject in other cattle.
The size of the chip is less than 12 mm and using an sterile injection kit it can be injected into the cattle. The injector size is around 115 mm having 7 gms of weight.
Once the chip is injected it stays there in the same position of the animal connectivity tissue, the chip’s bio-compatible glass will help to be in position. Connectivity tissue is one of the four types of tissue others are – epithelial, muscle, nervous tissue.
Inject able Implant locations
| Animal Type | Location |
| Dogs, Cats | Below the skin at the back of the neck, between the shoulder blades on the dorsal midline. |
| Horses | Left side of the neck, half the distance between the poll and withers, and approximately one inch below the midline of the mane, into the nuchal ligament |
| Birds | injected into their breast muscles. Because proper restraint is necessary |
| Goat/ Sheep | caudal (tail), auricular (ear) and dorsal thoracic (withers) locations |
| Buffalo/Cow | caudal (tail), auricular (ear) and dorsal thoracic (withers) locations |
A veterinary doctor can use the above kits to inject the chips in cattle as prescribed above.
Case Studies
Uttaranchal Livestock Development Board(ULDB) Case Study
Insurance of Animals: A Maximum of 2 Milch Cow & Buffalo having the production of >1500 ltrs. milk per lactation will be insured on their market price basis. The age group of the animals to be insured will be as follows:
| 1. | Cow | 2 Years (age at Ist lactation) to 10 Years of Age |
| 2. | Buffalo | 3 Years (age at Ist lactation) to 12 Years of Age |
At any time during the insurance coverage the animals should not exceed the maximum age limit.
Insurance Coverage: The animals will be insured for the duration of 1- 3 years.
Insurance Premium: The beneficiary will share 50% cost of premium.
Identification of Animals: The insured animals will be identified by Poly Urethane Laser Printed Ear Tags.
Honorarium to the Veterinary Officer: The board will provide honorarium to the concerned Veterinary Officer of DAH & Dairy on following services rendered by them:
Health Certificate & Tagging for Insurance of Animals : Rs.50/- per animal.
Post Mortem Certificate for Claim settlement : Rs.100/- per animal.
The ULDB has tied up with Insurance Company for the implementation of this scheme in Haridwar & Udham Singh Nagar districts. In the pilot phase of this scheme a total of 3053 elite milch animals (1457 cows & 1596 buffaloes) were insured under this scheme. A total of 115 claim cases have been reported & the claim of Rs.10.76 lakh has been settled against 76 claims with the claim premium ratio of 0.317:1.
Total Animals Insured 3053
Total Number of Claims 115
Total Number of Settlements against Claims 76
Total Claim Value Rs 10,76,000
Average Claim Amount Size Rs 14158
Claim premium ratio of 0.317 : 1
Total Premium Amount received Rs 33, 94,321 Approx
Conclusion: Still under this statistical information it’s unclear on how much % of authentication issues that still could exists. On a mass volume of Insured cattle the percentage of Fraud cases would impact in a huge money loss.
CAG (Comptroller Auditor General of India) Report
The following table indicates the coverage of cattle livestock insurance business by the Company as compared to the entire Industry:
(Figures in lakhs)
| Year | No. of animals covered | Gross Direct Premium
Rs | Incurred claims
Rs. | Percentage
Claim Ratio |
| Industry | New India |
| 1989-90 | 181.9 | 36.6 | 2112.97 | 1992.34 | 94.3 |
| 1990-91 | 172.6 | 33.7 | 2117.00 | 1593.42 | 75.3 |
| 1991-92 | 163.8 | 22.8 | 2109.04 | 1554.71 | 73.7 |
| 1992-93 | 180.6 | 25.6 | 2195.21 | 1655.12 | 75.4 |
| 1993-94 | 177.36 | 25.2 | 2670.57 | 1552.20 | 58.1 |
| Averages | 175 approx | 29 approx | 2241 approx | 1670 | 75 approx |
Considering the total cattle livestock population of 2720 lakhs, the coverage of less than 200 lakhs (6.5 percent) by the entire insurance industry is quite insignificant. This indicated that the rural marketing force of the Company needs to be strengthened.
The insurance covers cattle under IRDP and non-IRDP schemes. The claims ratio was more in the case of non-IRDP schemes covered animals than those covered under IRDP. Almost all the animals covered were financed through banks and policies were issued on the strength of proposals submitted by the banks and the certificate furnished by the Veterinary Officers about the particulars of the animals. Though the animals covered were being identified by the ear tags, there is no system to verify whether the ear tags were actually affixed by the operating offices for identification at the time of claim. The Management stated (January 1994) that (i) the identification was done by ear tags besides natural identification marks noted in the health certificate issued by Veterinary Doctor, (ii) their veterinary officers were advised to carry out spot verification periodically and wherever tags were not available necessary retagging was carried out and
(iii) on completion of tagging and retagging work, prescribed fee was paid to vets/para vets/taggers.
In the present system of Cattle Insurance, it is difficult to ensure that pre-acceptance health check-up has been done as envisaged. At the grass root level, death verification is often loose and open to doubt. It is not always the case that all animals belonging to an owner are insured and consequently the possibility of claim on uninsured animal cannot be ruled out. The Management stated (January 1994) that they had advised their operating offices not to allow selection, though in the case of bank-financed cattle, this could not be ensured in spite of persuasion. The scope of the policy needs to be amplified so as to plug the loopholes.
The policies issued to cover private animals constituted only 10 percent of the total cattle portfolio. The Ministry stated that due to a number of constraints such as non-availability of rural representatives and development officers, animal coverage on the scales envisaged could not be achieved.
The implementation of the scheme has been slack and irregularities noticed in test check of the cattle insurance policies issued by Nagpur Divisional Office I & II during 1987-88 to 1990-91 are given below:
(i) Non collection of certificate for proof of death.
(ii) Non-insistence of postmortem certificate at the time of settlement of claim.
(iii) Settlement of claims without adhering to policy conditions such as production of ear tags, photographs, panchnamas which are pre-requisite to prove genuineness of the claim,
In some cases, Development Officers of the Branches to whom the ear tags were issued did not send periodical returns to show the utilisation of ear tags by them with such details as ear tag number, corresponding Policy number, date of issue of policy, date of tagging, balance stock of ear tags with them at the end of every month, etc. No watch is kept for the receipt of these details so as to minimize the possible misuse and to serve as a loss control measure. While the Ministry agreed that most of the cattle heads covered are those financed through banks, it stated that elaborate instructions are issued regarding identification of cattle and sometimes because of the nature of activities which are spread over vast areas, many times in remote locations, full observance of rules may not be possible. Further Ministry stated (August 1995) that only animals in the age group of 2 to 10 years are covered under insurance and that wherever ear tags were not collected, photographs and other relevant documents were called for and after complete satisfaction, the claims were settled. The Ministry added that wherever spot policies were issued and claims settled without proper sanction, officials were charge sheeted and suitable penalties have been levied on those found guilty.
Conclusion: In the above information provided the percentage to claim ration is very high indicating a possible higher percentage of fraudulent claims, process violation issues.
Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, Govt of India, New Delhi : Annual Report 2007-08
Livestock Resources
Livestock Population (Million Nos)
| S.no | Species | Live Stock Census | Annual Growth Rate % |
| | | 1997 | 2003 | 2003 Over 1997 | Annual (Compounded) |
| 1 | 2 | 3 | 4 | 5 | 6 |
| 1 | Cattle | 198.88 | 185.18 | -6.89 | -1.18 |
| 2 | Buffalo | 89.92 | 97.92 | 8.9 | 1.43 |
| 3 | Yaks | 0.06 | 0.07 | 16.67 | 2.6 |
| 4 | Mithuns | 0.18 | 0.28 | 55.56 | 7.64 |
| | Total Bovines | 289.04 | 283.45 | -1.93 | -0.32 |
| 5 | Sheep | 57.49 | 61.47 | 6.92 | 1.12 |
| 6 | Goat | 122.72 | 124.36 | 1.34 | 0.22 |
| 7 | Pigs | 13.29 | 13.52 | 1.73 | 0.29 |
| 8 | Other Animals | 2.85 | 2.21 | -22.46 | -4.15 |
| | Total Live Stock | 485.39 | 485.01 | -0.08 | -0.01 |
| 9 | Poultry | 347.61 | 489.01 | 40.68 | 5.85 |
Livestock Insurance Scheme details (Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, Govt of India)
Under this centrally sponsored scheme, which was implemented as a pilot basis as part of common minimum programme of the government for the years 2005-06 and 2006-07 of the 10th five year plan.
Insurance is covered for crossbred and high yielding cattle and buffalos at maximum of their current market value
50% of the insurance premium is to be paid by the beneficiary and the rest by the central government
# Of selected districts across country : 100
Approved outlay : Rs 120.00 crore
# of Animals covered under the scheme : 5, 32,000
Expenditure : Rs 24.15 crore
# of Claims received : 12892
# of claims settled : 8850
Claims settled amount : Rs 11.37 crore
| Year | No. of animals covered in millions | Gross Direct Premium in Rs (Crore) | Incurred claims Rs (Crore) | Percentage |
| 1989-90 | 21.85 | 211.3 | 199.2 | 94.3 |
| 1990-91 | 20.63 | 211.7 | 159.3 | 75.3 |
| 1991-92 | 18.66 | 210.9 | 155.5 | 73.7 |
| 1992-93 | 20.62 | 219.5 | 165.5 | 75.4 |
| 1993-94 | 20.26 | 267.1 | 155.2 | 58.1 |
| 1994-95 | 14.3 | 106.87 | 71.5 | 67 |
| 1995-96 | 15 | 113.39 | 74.05 | 65 |
| 1996-97 | 14.7 | 122.54 | 74.83 | 61 |
| 1997-98(p) | 16.5 | 137.4 | 93.32 | 68 |
Considering the historic data for the Period of 1989-90 till 1996-97(p) :
No. of animals covered in millions : 162.52
Gross Direct Premium in Rs (Crore) : 1600.7
Incurred claims Rs (Crore) : 1148.4
Percentage of Claims : 72% (aprox)
ROI (Return on Investment) Analysis
Average Cattle Cost Rs 15,000 /-
Average Tagging Cost Rs 200 /-
| # Cattle | Tagging Cost in Rs (in Crores) | Min Fraudulent Claims to match with Investment | Profit if 5% Fraud Detection | Profit if 10% Fraud Detection |
| 10,000 | 0.20 | 133 | 0.55 Cr / 500 Cattle | 1.30 Cr / 1000 Cattle |
| 20,000 | 0.40 | 267 | 1.10 Cr / 1000 Cattle | 2.60 Cr / 2000 Cattle |
| 50,000 | 1.00 | 667 | 2.75 Cr / 2500 Cattle | 6.50 Cr / 5000 Cattle |
| 1,00,000 | 2.00 | 1333 | 5.50 Cr / 5000 Cattle | 13.00 Cr / 10,000 Cattle |
