We instinctively donate for the relief of disasters, but while relief reduces suffering and helps recovery, it seldom reduces the risks faced by vulnerable communities. In fact, a growing emphasis on relief diverts attention from preventing future disasters, which perpetuates the vulnerability of communities at risk. Donors need also to start investing in reducing risk, and disaster insurance is one way to do it.
The majority of low-income communities at risk in India are not protected from the loss of life, livelihood and assets that results from their vulnerability to natural disasters. India’s National Policy on Disaster Management, drawn up in 2009, concedes that the government cannot compensate all the victims of a disaster at a sufficient scale and speaks of promoting new financial tools such as ‘catastrophe risk financing, risk insurance, catastrophe bonds, micro-finance and insurance’ to cover such losses. However, this policy is not matched with investment from private or public sources.
There is a great potential opportunity for the Indian market to absorb innovative and affordable micro-insurance products, something humanitarian donors can capitalize on. Disaster losses in India can be financed through the rapidly growing Indian economy, a well-established insurance industry and successful global experiences of risk financing through insurance. What is needed is a leap ahead by one or more donors to build on successful cases to increase the reach and incidence of this practice.
While most of the money raised through emergency appeals in south Asia (as elsewhere) goes to relief and reconstruction, a few local organizations have successfully demonstrated the value of promoting disaster micro-insurance. One such organization is the All India Disaster Mitigation Institute (AIDMI). A consultation with communities in Bhuj following the 2001 Gujarat earthquake revealed that only 2 per cent of those surveyed had insurance of any type. From this, a disaster micro-insurance scheme emerged, designed by AIDMI with initial support from two regulated public sector insurance companies and called AfatVimo, which means ‘disaster insurance’ in Gujarati.