Kathmandu, July 10

Livestock farmers, who have purchased insurance products to provide cover to their farm animals, will not be entitled to compensation for losses triggered within 15 days of the purchase of the policy beginning July 16, the Insurance Board (IB), the insurance sector regulator, has said.

Amending the Crop, Livestock and Poultry Insurance Directive, the IB has added a provision on ‘waiting period’ of 15 days for livestock insurance business, which enables non-life insurance companies to deny payment against losses accumulated by policyholders in the first 15 days of purchase of the product.

This provision, which will come into effect from the beginning of the next fiscal year, or July 16, however, will apply exclusively to losses triggered by diseases. This means policyholders can still demand for compensation if their animals die of other causes, such as natural disaster, within 15 days of purchase of insurance policy.

“We had to resort to this measure because it became difficult for insurers to determine whether livestock, especially the imported ones, were free from disease at the time of policy’s issuance,” IB Deputy Director Kundan Sapkota told The Himalayan Times. “We probably would not have added this provision in the directive had the quarantine checks been stringent in the country.”

The IB enforced Crops, Livestock and Poultry Insurance Directive in January 2013, making it mandatory for all non-life insurance companies to sell various agriculture-related insurance products, including livestock.

These livestock insurance products can be bought by paying annual premium equivalent to five per cent of the sum insured.

The sum insured for livestock depends on types of animals policyholders are rearing.

For instance, maximum sum insured for high-breed dairy cow and buffalo has been fixed at Rs 150,000 and Rs 125,000, respectively. Sum insured for water buffalo and ox raised for reproductive purpose, on the other hand, has been fixed at Rs 70,000, while insurance coverage for water buffaloes and oxen used for transportation purpose has been fixed at Rs 40,000. Similarly, sum insured for sheep and goats raised for meat production has been fixed at Rs 8,000.

As per the IB, policyholders can claim for up to 90 per cent of the sum insured in compensation if their animals die. This provision, however, has a downside, as policyholders cannot recoup all the losses even if market value of the animals they were rearing was higher than the sum insured.

To partially address this problem, the IB has now introduced a provision, which enables policyholders and insurance companies to determine sum of insured cows and buffaloes based on market price and other technical factors.

Similar method can be followed to fix the insurance coverage for calves and kids, says the revised IB directive issued today. But there is a caveat. Policyholders who have purchased insurance products for calves and kids will get compensation based on three factors — the age of the animal, number of months it takes to reach puberty and number of months the animal survived after issuance of the policy, adds the directive.

This means if a newborn calf, covered by insurance of, say, Rs 25,000 and expected to reach puberty in 30 months, dies after two months of its birth, then the policyholder will be entitled to maximum compensation of Rs 1,666.67. This implies the compensation amount will be calculated by dividing sum insured by number of months it takes to reach puberty and multiplying this result by the number of months the animal survived.

The IB has also said policyholders can claim for 30 per cent of sum insured as compensation if dairy animals cannot produce milk. Earlier, the coverage for such incident stood at 50 per cent of the sum insured.

“But policyholders, who have not filed any claim, can now demand for ‘no-claim’ discount,” says the

directive.

As per this provision, policyholders who have not filed any claim within a year of purchasing the policy, from July 16 onwards, can buy next year’s policy at a discount of five per cent. The no-claim discount rate has been fixed at seven per cent of the premium for those who have not filed any claim for two consecutive years and 10 per cent for those who have not filed any claim for three consecutive years.

Meanwhile, the IB has said losses under crop insurance will not be covered if farmers use seeds that were not certified by the government. “This, however, does not apply to locally produced seeds,” says the directive.

Quick glance

• No compensation if livestock dies of disease within 15 days of purchase of policy
• Insurance coverage of cows and buffaloes can be fixed based on market price
• Coverage for livestock that fail to produce milk reduced to 30 per cent of sum insured
• Policyholders who do not file claims to get discount on premium
• No compensation under crop insurance in case of use of seeds not certified by government