• Anupama Sharma, Alok Shukla
An Exploration – Community Based Livestock Insurance Scheme

Livestock insurance products are generally expensive and their reach to the poor is negligible, except when linked to government schemes. Even after more than 30 years of government efforts, out of world’s largest cattle pool, only 7% of cattle in India are covered under insurance. Of late, even though new insurers have entered the market, most are unwilling to offer livestock insurance due to its high risk perception. The major challenge in the livestock insurance business is the incidence of moral hazard (fraud), and insurers estimate that more than 25% of the claims settled are fraudulent in nature. In this scenario, the Community Based Model (CBM) can make a difference. CBM helps to reduce moral hazard and transaction costs. CBM helps reduce false claims, documentation, and costs of insurance including transaction and time cost, and potential risks. One such example is the Loan Protection Scheme (LPS) by the Vizianagaram District Poverty Initiatives Project (DPIP) in Andhra Pradesh (AP), India. The Loan Protection Scheme for livestock is run by the community, which has an incidence rate of 2% compared to the country average of 4%.

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