Livestock, aquaculture need easy, accessible insurance services: Swiss Re

Earlier this year, Swiss Re partnered with Maharashtra govt to improve crop insurance schemes

Livestock and aquaculture industries need customisable, easily accessible insurance services, said two reports released by Swiss Re. The reports, titled 'Livestock in India - diversification for rural development' and 'Aquaculture in India - growing a new industry', highlighted the need for increasing insurance penetration in these sectors to bridge the protection gap in India, making the country a food secure nation.

Earlier this year, Swiss Re partnered with the Maharashtra government to improve crop insurance schemes for farmers in this state. The partnership aimed to increase the awareness on crop insurance and enable sustainable living for farmers, as well as help them fast-track settlement of their insurance claims.

Through this collaboration, Swiss Re would assist in village level surveys for crop loss through satellite-based imaging. The company will also implement a pilot project covering five crops, including Jowar and Cotton. With a vision to make the state a role model for others, Swiss Re's subsequent plan is to cover a large number of villages in Maharashtra.

The Swiss Re reports said that agriculture is a risky business exposed to volatile production and commodity prices, and ensuring a sustainable food supply for India's growing population is one of the biggest global challenges today. There is a need for insurance companies to reach the rural markets through new marketing mechanism and rely less on the traditional bancassurance model.

Swiss Re plans to work closely with partners in the agriculture food chain, including associations, government, industry bodies and insurance partners, to improve the rural sector's access to modern financial risk management and bring its benefits closer to them.

It said that two of the industries with a big growth potential but underinsured are livestock and aquaculture. India is the second largest livestock market in the world, with 104.52 million of India's 195.6 million rural households owning cattle.

However, this huge livestock industry faces a number of potential threats including floods, fires, epidemics and unavailability of fodder. Moreover, there are no customised insurance product offerings to suit the diverse needs of farmers from different regions and backgrounds.

In India, insurance is bundled with credit, which are not always what farmers need, as the requirement for insurance can be for a longer period compared to the credit period.

If the farmers want to renew their insurance policies, they would be obliged to take out another loan even when they do not need one. The issue is further compounded by lack of adequate about, and access to, insurance and micro-insurance products.

"Offering localised and tailored policies can be an effective way of convincing livestock farmers to take interest in insurance. Bundling revenue protection cover with livestock insurance could be another.

"Infrastructure and distribution are very real challenges in India, but these can be overcome with careful planning and innovative use of technology," said Harini Kannan, Head of Agriculture Reinsurance for South West Asia at Swiss Re.

Almost 14.6 million people in India make their living from fishing. Marine and farm fish harvests in India have doubled since 1992 to 9.04 million tonnes in 2013.

India's marine food exports rose from $1.64 billion in 2009-10 to $4.95 billion in 2013-14. Most of this growth stemmed from aquaculture - an industry that was widely supported by insurance companies in its boom time in the mid-nineties, but which has since lost favour owing to uncontrollable disease outbreaks in aqua farms.

Aquaculture is at risk from diseases like white spot syndrome, early mortality syndrome, argulosis and others; from natural perils like heavy rains, storms, earthquakes or tsunamis; from cannibalism (triggered by overcrowding), malnutrition and predator attacks.

Swiss Re said that there is a variety of insurance schemes in the Indian market for aquaculture; however access to them is extremely difficult, which adversely affects the number of subscriptions.

"Small-scale farmers can benefit from forming organisations, sharing resources, helping each other, and implementing best management practices through cluster farming. Credit-linked insurance, gross margin protection and hedging of input cost can go a long way toward transforming the industry into a commercial business able to supply growing cities," added Kannan.