On the 8th November 2013, Super Typhoon Haiyan struck the Philippines. By the end of the day, the typhoon would have crossed land six times and left a path of destruction that impacted over 16 million people and displaced almost 4.1 million people.
People in the Philippines are all too familiar with typhoons, with an estimated 24 hitting the country every year. However, in addition to the high winds, the typhoon had an unprecedented storm surge which was responsible for most of the 6,300 casualties. The damage this caused to agriculture and infrastructure is estimated to be around USD 700 million.
The Philippines’ National Disaster Risk Reduction and Management Plan, issued in 2011, is made up of four cornerstones: disaster prevention and mitigation, disaster preparedness, disaster response and disaster rehabilitation. The disaster rehabilitation and recovery section of the plan relates to restoring and improving facilities, livelihoods, living conditions and organisational capacities of affected communities, and reduced disaster risks. It is here that microinsurance – affordable insurance tailored to the needs of low-income populations – should feature strongly, due to its ability to help low-income and vulnerable people finance the rebuilding of property and restarting of livelihoods after a disaster event.
Governments of disaster-prone countries such as the Philippines must primarily focus efforts on disaster prevention and mitigation by building up the infrastructure to reduce vulnerabilities and enhancing capacities, but implementing a comprehensive framework which covers ex-post and ex-ante measures is vital. Microinsurance has yet to be systematically included as a key disaster rehabilitation and recovery tool in the approaches of many emerging economies.
In 2014, the Microinsurance Network, a non-profit organisation dedicated to the promotion of effective and responsible insurance services for low-income people, produced a report with GIZ RFPI looking at how microinsurance performed in the Philippines following Typhoon Haiyan. With a penetration ratio of 20.6%, the Philippines is widely considered a success story for the nascent microinsurance sector. The study found that at least PHP 532 million (USD 12 million) in microinsurance claims have been paid since the typhoon, with an average claims payout of PHP 4,777 (USD 108). Roughly 50% of this went towards restarting livelihoods, with the other 50% going towards rebuilding houses. Providers, intermediaries and regulators proved flexible and adaptable, meeting the challenges presented by the infrastructural and human cost of the typhoon by building on their strong networks and established relationship with affected communities to process claims as efficiently as possible whilst facing considerable challenges.
Microinsurance is clearly not the only solution to disaster risk management, but with strong microinsurance infrastructure and adaptability as seen in the Philippines, the money from an insurance claims can help to bridge the gap after a disaster event and help prevent low-income people from being pushed into a cycle of poverty.
Read the full report here
Julia Graham is the knowledge and advocacy coordinator of the Microinsurance Network, an international multi-stakeholder platform for microinsurance experts to work together and focus on key areas of development in the sector. Its mission is to promote the development and delivery of effective insurance services for low-income people by encouraging shared learning and facilitating knowledge generation and dissemination.