Disaster insurance offers many advantages, particularly when compared to reliance on post-disaster aid, but remains relatively under-used in developing countries. High premiums are often considered as one of the key reasons why uptake remains low, suggesting that those who see disaster insurance as a development priority should consider interventions to reduce the price of insurance, which would increase affordability for households, and ease potential short term fiscal and political constraints for countries.
This report investigates the role of public premium subsidies in increasing the uptake of disaster insurance. In particular, it investigates the effectiveness of premium subsidies as a mechanism for increasing demand for disaster insurance schemes. The findings are based on:
The report begins with a reflection on the discussions held with stakeholders throughout this project (section 2). Section 3 provides an update on the current application for disaster risk insurance in developing countries, with a special focus on the role of national governments in the design and implementation of this tool. The challenge presented by the price of insurance is considered in section 4, summarizing recent findings on the importance of premium levels for insurance uptake. Section 5 looks at different intervention options for the public sector to reduce the price of insurance, and section 6 explores in greater detail the application of premium subsidies. In section 7 the findings of the quantitative and qualitative in-depth analysis of six intervention options and their impact are reported and the implications for design and the implementation of premium subsidies are reflected upon in section 8. The report concludes with a discussion of the key findings in section 9.
This report has been produced by vivideconomics / Surminski Consulting / Callund Consulting for Evidence on Demand with the assistance of the UK Department for International Development (DFID) contracted through the Climate, Environment, Infrastructure and Livelihoods Professional Evidence and Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by DAI (which incorporates HTSPE Limited) and IMC Worldwide Limited.