This slideshare is about the study of Insurance: COncept, Mechanism and effectiveness in agriculture and livestock in Nepal. It has included the insurance scheme adopted in Nepal as per the Directive launched by Nepal Government in January 2013.
2. Agriculture is a very risky business due to the
uncertainty in production and the fluctuation of
the price.
Deviation of the weather events from the
required to the plant causes the adverse effect
on the yield.
The weather induced disaster like flood,
inundation, drought, hails roam, extreme wind
etc causes the catastrophic loss to the crop and
the livestock production.
3. Nepal is highly prone to the natural disaster
and the climate change, which has made the
agricultural production very vulnerable and
risky.
Besides this, increasing commercialization and
the monoculture has increased the risk
associated with the pest and the disease attack
and other various types.
4. Agricultural risk management relies on an
optimal combination of technical and financial
tools (Itturioz, 2009).
Farmer and agricultural value chain
participants can use several tools to deals to the
multiple sources of the risk encountering in the
production and marketing. Among the several,
Insurance is also the best method to cope such
risks at minimal.
5. Though various FINGO, cooperatives and the
microfinance institution started livestock and
crop insurance (very few) in the past, there was
no formal regulation for the crop and the
livestock insurance until 2013.
So government of Nepal had introduced the
formal crop insurance through the crop and the
livestock insurance directives in Magh
2069(January, 2013) for the first time to
promote agricultural insurance in the country.
6. This directive has allowed the current non life
insurance company operating in the country to
provide the insurance related to the agriculture.
To encourage the adoption, government
initially had given 50% subsidy in premium
which is increased to 75% from Bhadra 26,
2071(September 11,2014)
7. Objectives
To study and highlight about the Agriculture
and Livestock Insurance concept in Nepal.
To trace the insurance mechanism in Nepal
related to Agriculture and Livestock.
8. Insurance is a form of risk management used to
hedge against a contingent loss.
It is the equitable transfer of a risk of loss from
one entity to another in exchange for a
premium or a guaranteed and quantifiable
small loss to prevent a large and possibly
devastating loss (Iturioz, 2009).
9. Agricultural insurance schemes help to reduce the
risks and vulnerabilities of poor rural smallholders
and open their access to a range of financial
services for improving their livelihoods. (Hazell,
Pomareda, & Valdes, 1986)
At the same time, insurance reduce the risk of
loan default for given amounts of credit, enabling
banks to increase their lending to agriculture and
to improve their loan recovery rates.
11. Nepal formally announced Crops and
Livestock Insurance programme to be launched
from January 2013 by issuing crop and
livestock insurance directives.
12. Before introduction of Crop and Livestock
insurance Directive, non formal schemes were
in practice in limited extent mainly in livestock
sector for some run short span of time through
NGOs, Cooperatives, and Financial Institutions
and government projects under the technical
and financial assistance of international
development agencies.
13. Formal organized insurance in Nepal
In Nepal, organized non life and life insurance
business was started from 1947 and 1972
respectively. The Nepalese Insurance Market is
regulated by the Insurance Board (Beema
Samiti)
The Insurance Board is constituted under the
Insurance Act of 1992 to systematize,
regularize, develop and regulate the Nepalese
life and non-life insurance markets.
14. Non Regulated Livestock Insurance
Livestock insurance schemes that were operated
as the non regulated way by different projects,
cooperatives and financial institutions are listed
below:
Deposit and Credit Corporation
Small Farmers’ Development cooperative Ltd
Community Livestock Development Project
Centre of self help development supported
livestock insurance
Participatory District Development Program
15. Formal crop and livestock insurance and its
mechanism
The formal crop and livestock insurance was
established only after the release of the Crop and
the livestock insurance directives in January 2013.
It is the first agricultural insurance policy
introduced in the country.
It has made the mandatory provision for all non
life insurance company working in the country to
provide crop and the livestock insurance services.
16. Former MOAD introduced a subsidy on the
premium paid for crop and livestock insurance in
June 2013. The government provided a 50 percent
subsidy on insurance premiums paid by individual
farmers,
Farmers’ groups and farmer cooperatives for crops
and livestock. Since the year 2014, Government of
Nepal has increased subsidy premium from 50
percent to 75 percent to attract farmers in insuring
their agricultural commodities.
17. Government of Nepal has also a provision to
provide additional 15% subsidy on premium if
a cooperative insures its agribusiness.
17 out of 19 non-life insurance companies have
offered agricultural insurance, and insurance
coverage is particularly higher for livestock
than the crop sector
18. Highlights of Crop and Livestock Insurance
Directives
Crops insurance covers the production cost
Minimum of half Ropani(1 ropani=508 sq m)
in hills and mountain and 1 Kattha(333 sq
meter) in terai.
19. Livestock and poultry insurance will provide
coverage to all types of cows, oxen, buffalos,
yak, female yak, sheep, goat, swine, chicken
and ducks based on sum insured fixed by the
Insurance Board.
20. Premium rate
Premium rate of 5% of the insured amount is
fixed per year
For fish 2% of the premium of the insured
amount per year is fixed
15% discount for the premium if the insurance
is done through group.
21. Compensation
90% compensation for actual loss
50% compensation for partial loss
Claim settlement process should be wrapped
up within 30 days of first reporting the event.
22. Insurance mechanism is relied on following
three basis
Investment based
Production based
Weather based ( Jumla-Apple- Peril(Hail and
Rainfall)
23. Though it was expected that many farmers
would be attracted by the insurance schemes as
offered by the Nepal Government but adoption
is very low due to
crop insurance scheme
legal environment
technical capacity
distributional aspects of the insurance company
high administrative and operational costs
24. Agriculture business being a risky business due to
various invasive pest and diseases as well as
Natural hazards( hail, frost, rainfall, etc.).
Insurance in agriculture and livestock is key to
formulate at the grass root level.
Insurance mechanism are to be extended all over
the country through Government and Non-
government Insurance Companies. Government
should extend the theme of insurance in line to
meet the need of farmers.
