Global Risk Forum GRF Davos Microinsurance An Innovative Tool for Risk and Disaster Management Microinsurance An Innovative Tool for Risk and Disaster Management Edited by: Emanuela Morelli Giorgio Amsicora Onnis Walter J. Ammann Corina Sutter Copyright c 2010 by Global Risk Forum GRF Davos All rights reserved. No part of this publication or the information contained herein may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopying, recording or otherwise, without permission from the publisher. Although all care is taken to ensure the integrity and quality of this publication and the information herein, no responsibility is assumed by the publisher nor the author for any damage to property or persons as a result of operation or use of this publication and/or the information contained herein. Cover design: LSA Photografi, Serena Morelli e Leonardo Damo, Napoli, Italy Published and distributed by the Global Risk Forum GRF Davos: www.grforum.org - [email protected]. ISBN 978-3-033-02463-2 Printed in Switzerland by Buchdruckerei Davos AG Contents Preface iii Prefazione v Introduction Emanuela Morelli & Giorgio Amsicora Onnis 1 I Keynotes on Microinsurance Integrated Risk Management in Microinsurance Ralf Radermacher, Jacquiline Roberts Singh & Siddharth Srivastava 7 Microinsurance and Climate Change Thomas Loster & Dirk Reinhard 39 Improving Access to Insurance for the Low Income Market { the Role of Enabling Policy and Regulatory Frameworks Arup Chatterjee 43 II Life Microinsurance Microinsurance through Mutual Benefit Associations in the Philippines Camilo G. Casals 81 Understanding the Context Is Understanding the Impact: Evidence from a Qualitative Microinsurance Impact Survey in Indonesia Martin Hintz 109 Zurich Bolivia: Demonstrating Key Microinsurance Success Factors Raymond Risler & Craig Churchill 137 III Health Microinsurance SEWA's Model of Microfinance as a Risk Management Instrument for the Poor Tara Sinha, Mirai Chatterjee, Jayashree Vyas 157 Penetration by Lenient Method Francis Somerwell 173 i Microinsurance { An Innovative Tool for Risk and Disaster Management Voluntary Affiliation to Micro Health Insurance and Social Capital among Resource-Poor Persons: Initial Evidence from India Iddo Dror 187 IV Disaster Microinsurance Robust Decision Making for Sustainable and Scalable Drought Index- Based Microinsurance in Ethiopia: Reducing Weather Related Disaster Risk With Rural Agro-Insurance Jillian Dyszynski & Takeshi Takama 211 Practical Experiences in Improving Affordability and Delivery Channels of Weather Index Insurance for Kenyan Smallholder Farmers Rose Goslinga 247 Shock-Coping and Household Finance in Rural Vietnam: Evidence and some Implications Niels Kemper & Rainer Klump 269 Microinsurance and Public-Private Partnership in the Context of Catas- trophic Risk Management: Examples from Indonesia Barbara Rohregger & Matthias Rompel 299 Resilience Against Disasters and Microinsurance { Managing Urban Risks in Jakarta Mario Wilhelm 321 Disaster Insurance for the Poor: All India Disaster Mitigation Institute and Afat Vimo Mihir Bhatt, Tommy Reynolds & Mehul Pandya 341 Acknowledgements 355 List of Authors 357 ii Preface Undernourishment, poverty, and persistent underdevelopment, overlapping with natural catastrophes, vector borne diseases, and many more risks add greatly to the hardship of vulnerable people and communities. The impact of natural catastrophes on societies and economies has increased considerably over the last two decades and is likely to grow further as a result of climate change. Given both the rise of population and economic activity in areas with a high risk exposure the scale and impact of major weather-related events will increase, and the economic severity of natural catastrophes will grow. Severe weather can wipe out a family's crop, weaken their livelihoods, deplete their capital, reduce resilience, and in particular leave them with nothing to eat for the rest of the season. An accident or the death of a breadwinner may force children out of school and into the labour market. These events and responses are major contributors to the perpetuation of poverty, confining people in poverty-traps. Impacts at the household level aggregate and multiply into higher level effects on the regional and national economy. New and innovative approaches have to be established to reduce vulnerability and poverty, and to adapt to climate change. Microinsurance covers for accidents, ill-nesses, death, natural disasters and property loss. It has the potential to help low-income families to cope with these risks for the cost of an affordable premium. The book in hand contains fifteen papers in total, all focusing { from different perspectives { on an integrated approach in risk and disaster management. Case stud- ies from Africa, Asia and Latin America involving a broad variety of stakeholders, institutions, risks, methods, and business models, reveal the enormous potential of microinsurance in particular also in disaster management. It is both with great sadness and warm appreciation that we dedicate this book to the lead editor and author, Emanuela Morelli. Emanuela passed away on May 26, 2009 after eighteen month of struggle with cancer. During this time, Emanuela was admirably brave, full of ideas, hope and confidence, always with a strong living will and believe in the future, carefully tended by her family, her partner and her friends. iii Microinsurance { An Innovative Tool for Risk and Disaster Management Emanuela was GRF Davos' first employee, joining us at our very beginning in September 2007 as a Postdoc supported by the Swiss Government with a scholarship. With her profound professional and scientific background in microfinance she brought in many new ideas and proposed novel approaches for microinsurance in disaster management. With great enthusiasm and commitment Emanuela planned and organized a number of sessions on microfinance for the International Disaster and Risk Conference IDRC Davos 2008, and started to draft the outlines of a book on microinsurance. Due to her illness she was unfortunately not able to participate at the IDRC Davos in August 2008, but insistently continued with the book project and convinced speakers to elaborate their papers for the book. It was not granted to her to see her work finished. Giorgio Amsicora Onnis, her partner, took over her tasks and responsibilities and finished her work with great carefulness and commitment. Emanuela had a wonderful personality, fully committed to life, profession and work. We miss her merriness, her kindness, her modesty, her readiness to help others, and many more attributes we could only learn from her. Emanuela strongly believed that microinsurance is an important strategy for low-income households to manage risks and disasters. May this book help to promote future microinsurance projects for the benefit of the poor. Let me also express my sincere thanks to the authors and to the reviewers for their valuable work to guarantee for the uniqueness and quality of the content, to Giorgio Amsicora Onnis, Emanuela's partner, for his dedicated commitment to finish her work, to Corina Sutter for the layout and preparing the printing of the book, and to all, not listed by name here. Thank you all for making the publication of this book happen in memory of Emanuela. Davos, May 2010 Walter J. Ammann President Global Risk Forum GRF Davos iv Prefazione Denutrizione, povert`ae sottosviluppo endemico, sommati a catastrofi na- turali, malattie infettive, e a molti altri fattori di rischio creano una situazione di pesante impatto sulla gi`adifficile vita delle persone e delle comunit`api`uvulnerabili. L'impatto delle calamit`anaturali su societ`aed economie `e notevolmente cresciuto negli ultimi 20 anni ed `eprobabile un suo ulteriore aumento a causa dei cambiamenti climatici. Con l'incremento demografico e l'espansione delle attivit`aeconomiche in aree ad elevato rischio, l'impatto delle catastrofi indotte dal cambiamento climatico diverr`asempre pi`udevastante e la gravit`adella crisi economica sempre maggiore. Gli eventi meteorologici estremi possono spazzare via il raccolto di una famiglia, indebolirne la fonte di reddito, costringerla a dar fondo ai risparmi, ridurne la capacit`adi ripresa e, soprattutto, privarla del sostentamento per il resto della stagione. Un incidente o la morte del capofamiglia pu`ocostringere i figli ad abbandonare gli studi e ad entrare nel mercato del lavoro. Questi eventi e le relative strategie di risposta, confinando le persone nelle cosiddette trappole di povert`a,costituiscono i fattori principali che contribuiscono alla perpetuazione dello stato di indigenza. Le ripercussioni negative che hanno operato su di un singolo nucleo familiare si aggregano e si moltiplicano tra loro, ripercuotendo l'impatto negativo ai livelli superiori e coinvolgendo l'economia prima locale e poi nazionale. E` necessario sviluppare approcci nuovi ed innovativi per ridurre vulnerabilit`ae povert`ae per adeguarsi ai cambiamenti climatici. La Microassicurazione offre copertura per incidenti, malattia, morte, calamit`anaturali e perdita di beni ed `e,pertanto, potenzialmente in grado di aiutare le famiglie a basso reddito ad affrontare tali rischi, facendo loro versare un premio assicurativo che si possano permettere. La presente opera contiene quindici articoli che, partendo da prospettive diverse, analizzano un approccio integrato alla gestione dei rischi e dei disastri naturali. Si tratta di