The benefits of livestock insurance in Kenya have not been felt by farmers because they have not known how the premiums and the payouts are arrived at. Nonetheless, the economic effects expressed through claims settlement and payments to a large extent prove the positive effects of livestock insurance.
While livestock insurance can help reduce risks, not all producers can afford livestock insurance coverage. Improved drought forecasting can help livestock producers to better avoid risks generated by drought.
What is livestock insurance?
A standard livestock policy covers such animals as dairy cattle, beef cattle, sheep, goats, pigs, horses, dogs, crocodiles, poultry, ostriches and pets. The insurance pay the owner of the animal should the animal die from accidents, illness, epidemics and emergency slaughter on the advice of a qualified veterinary surgeon; or death as a result of drought in ASAL areas. It may include theft, transit and furrowing risks.
A poultry insurance scheme covers layers, broilers, turkeys, and ducks against death from illness, controllable epidemics, and accidents. It can also extend to theft of insured birds.
Cover on theft is usually restricted to places which have approved security standards. Therefore the scheme does not cover livestock in cattle rustling areas and excludes intentional and economic slaughter or slaughter by government order. However the policy can be extended under certain circumstances to include other risks such as total and permanent infertility, first season congenital infertility, overseas transits or specialist stud packages.
General insurance cover is offered for short periods, usually one year. Most schemes cover large animals from six months of age to the economic lifespan of the animal. It is important therefore to seek advice from specialists in livestock when insuring livestock.
How does livestock insurance work?
The insured pays a premium to the insurer who issues an insurance policy specifying the period of cover, the specific risks covered, and the amounts the insured is entitled if and when the policy responds to a loss. When a loss occurs, the insured can lodge a claim against the insurer for the amount of the loss as stated in the policy. The insurer discharges its obligations by paying this amount to the insured.
The insurable value of animals is the agreed value provided to the insurer by the insured. This value is calculated depending on the quality of the animals depending on productivity or other values as perceived by the owner as in attachment to a pet. The insurance cover pays the owner of the lost animal the amount equivalent to the proposed at inception.
A veterinary certificate of loss and a written a post-mortem report from qualified veterinary surgeon will be required to prove loss. Positive identification of the carcass of the dead animal will also be required.
Insuring livestock for pastoralists in ASAL faces the difficulty of verifying the death of animals over a wide and remote area. Partnership of UAP, ILRI and Equity Bank has an annual livestock insurance policy that compensates pastoralists for death of livestock arising from inadequate pasture as a result of drought. Compensation based on the estimated mortality rates is done automatically if predicted mortality is above 15 per cent within the specified region. Pastoralists do not have to prove the death of their livestock. For example if mortality rate is 25%, herders receive compensation amounting to 10% of the value of the animals they insured.
Insured pay premiums of 3.25 to 5.5% of the value of their animals each year. Pastoralists pay about 3,800 Kenyan shillings to insure up to six head of cattle. Households with more cattle pay a higher rate.
To reduce the possibility of claims being filed for uninsured animals some insurers like APA Insurance insert into each animal a traceable device with unique a number which transmits radio signals (RFID). These devices are retrieved by qualified and approved veterinary practitioners once an animal dies. By reducing fraudulent claims, the technology benefits farmers through lower premiums and faster claims settlement. Others insurers oversee the tagging of animals using ear tags which can easily be removed.
Benefits of livestock insurance
- Pastoralists are able to restock animals lost following a severe drought.
- Insurance policies can be used by herders as collateral to buy food or drugs to help their animals survive difficult periods. Livestock insurance can provide herders with the means to obtain credit from financial institutions that are currently unwilling to lend due to climatic risks.
- Some insurers like Blue Shield Insurance add value to this service by joining hands with other stakeholders to create a market for insurance services. This is by educating farmers on avoiding risks, ensuring that farmers have loans to do their farming and initiating the drilling of boreholes in the low rainfall areas.
- Livestock insurance is a risk management tool for livestock farmers facing frequent or severe drought.