Swiss Re reports
Swiss Re today released two separate reports on the livestock and aquaculture industries in India based on a study on the developments, gaps, risks and opportunities across rural and urban populations. The reports, titled 'Livestock in India - diversification for rural development' and 'Aquaculture in India - growing a new industry', provide valuable insights, highlighting the need for increasing insurance penetration in these sectors to bridge the protection gap in India, making the country a food secure nation.Highlights:
Agriculture contributes 15% to India's GDP. Livestock contributes 26% to agricultural GDP
91% of cattle and 99.4% of cattle-holders in India are uninsured
India ranks second in the world in aquaculture with a market share of 6.3%
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Aquaculture insurance services are very few and difficult to access
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.
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.
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, said Harini Kannan, Head of Agriculture Reinsurance for South West Asia at Swiss Re. Infrastructure and distribution are very real challenges in India, but these can be overcome with careful planning and innovative use of technology. Farmers should be given affordable and easy access to facilities like vaccination of animals, advice on best farming practices, market and weather information. Regulatory and process reforms for livestock should take this into account.
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 USD 1.64 billion in 2009-10 to USD 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. 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.
Aquaculture needs to transition from a family-run to a commercial business with proper development of knowledge and infrastructure, added Harini. 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.
Swiss Re has a vast repository of knowledge at its disposal, gained from claims, risk management and products structures from across the world. We aim to translate this experience to the Indian market and offer relevant products to all, especially the underserved, said Harini. Insurance cannot substitute for the harvest of their efforts, but can shield them, to an extent, from unfortunate and unseen circumstances that may threaten their very means of livelihood. There is a lot to be said about the possibilities for a food-secure India and a lot more that can be done if all the concerned stakeholders, from the grass-root level to the highest form of Government, make concerted efforts in that direction, she concluded.
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