Insurance Effectiveness for disaster risk reduction and climate change adaptation

Event: Agricultural Risk Management and Insurance Workshop
Date: 5-6 December 2016

Risk insurance has been proposed to provide as a means of buffering the financial shocks and to inculcate the habit of risk awareness among the farming communities. As a result, there have been several agricultural insurance programs put in place. However, the progress in the spread of insurance has been sluggish owing to several reasons which include high residual risks in agriculture, inefficiencies attributable to adverse selection and moral hazard, poor availability of data to assess risks for designing effective risk insurance, lack of willingness to pay among farmers, lack of trust among the insured on insurance providers, poorly developed re-insurance industry and high insurance costs.
Moreover, there is very little systematic evidence on to what extent these approaches are designed keeping in mind the vulnerability aspects of communities to climate change and natural disasters, how well these approaches have embraced the principles of vulnerability and risk reduction and to what extent these interventions are able to help the last mile communities who need these instruments at most but are not often reached due to their geographical, political and social isolation.
This presentation will bring out the available evidence on the extent of insurance effectiveness, provide a conceptual discussion on what insurance effectiveness means, and what kind of interventions can address the risk and vulnerability aspects of these last mile communities, identify bottlenecks and their root causes and bring out opportunities wherein the financial inclusion instruments and approaches can be more effective in reducing especially the long-term vulnerability reduction.
The presentation will look at various two examples of insurance from Japan and India and provide results from an ongoing research project funded by the Asia-Pacific Network for Global Change Research, using an indicator framework that underlines the well laid out principles of vulnerability and risk reduction.