In August 2004, the All India Disaster Mitigation Institute (AIDMI) launched the Regional Risk Transfer Initiative (RRTI) in association with the Provention Consortium. Other key partners are the Chamber of Commerce and Industry of Small Businesses, the International Federation for Red Cross and Red Crescent Societies, the World Bank, the Asian Development Bank and the Department for International Development.

The main objective of the RRTI is in the convergence of micromitigation, microcredit and microinsurance as a precondition for effective local, low-cost risk transfer. It therefore strives to promote more effective risk management for the poor. The RRTI has been central in terms of establishing the Afat Vimo scheme as disaster insurance for the poor.

Background of Afat Vimo Following the 1998 Kandla cyclone, AIDMI established the Livelihood Relief Fund (LRF) with the main objective of building livelihood security and reducing economic risks through sustainable long-term recovery. Following the January 2001 earthquake in Gujarat, LRF expanded and played a major role during recovery from the February 2002 riots in Gujarat. In the wake of the 2004 tsunami, AIDMI responded again providing much needed livelihood relief.

To coincide with the launch of the RRTI in September 2003, AIDMI held a focus group session on microinsurance for the poor which brought to life the idea of a "Demand for Insurance Survey". The survey was conducted in September 2003 within 14 earthquake-affected slum communities in Bhuj, Gujarat. This provided information on what percentage of the population already had insurance (only 2%) and how many respondents were interested in taking out a policy in the future (73%). The survey also revealed that capacity building was required since awareness and understanding of insurance and risk transfer was low.

Afat Vimo Since the survey revealed need by beneficiaries for mechanisms to safeguard their newly replaced or created assets in the aftermath of disaster, the Afat Vimo scheme was born.

After negotiations with companies interested in supplying low-premium insurance policies to poor clients, good partnerships were forged with the Life Insurance Corporation of India (LIC) and the Oriental Insurance Company Ltd. (OIC). LIC committed to providing a life insurance policy under Afat Vimo and OIC agreed to establish non-life insurance policy coverage for Afat Vimo beneficiaries. The scheme was launched in August 2004, with the coverage of 829 LRF beneficiaries in Bhuj. It has extended its coverage to 5597 in February 2006. LRF beneficiaries are now covered in several districts in Gujarat, as well as in Tamil Nadu and Pondicherry in South India.

Description of the Afat Vimo Product Afat Vimo provides life and non-life disaster insurance to low-income clients who are beneficiaries of AIDMI's livelihood relief through the LRF. It covers policyholders for losses incurred in the case of 19 eventualities, among them earthquake, cyclone, lightening, and landslide.

Like all AIDMI initiatives, Afat Vimo focuses on the poor among disaster victims. Thus, the typical profile of Afat Vimo policyholders is as follows: ? Disaster affected. ? LRF beneficiary. ? Low-income household?average annual income Rs. 12000- Rs. 18000. ? Engaged in microenterprises in the unorganised sector. ? Average assets worth Rs. 9000. ? Average savings Rs. 200-Rs. 400.

The insurance scheme of Afat Vimo is unique since it combines life and non-life coverage in one policy. The coverage is provided by different insurance companies but is brought together by AIDMI under Afat Vimo.

The total payable premium in Gujarat for instance, is Rs. 146 (tax incl.) per household per annum. The life insurance component in this example includes an assured sum of Rs. 20,000 at a premium of Rs. 86, whereas the non-life insurance costs Rs. 60 per annum and covers house and contents (Rs. 40,000), stock-in-trade (Rs. 10,000) and personal accident (Rs. 25,000).

Complementary Services Provided by AIDMI As stated above, the role of AIDMI in the Afat Vimo scheme is of both facilitator and intermediary. Unlike other organisations, however, their activity is not limited to the initial stages of insurance coverage, but AIDMI's community-based approach ensures that they are actively involved with the beneficiaries at every stage. They are committed to supporting communities in the long-run when relief institutions leave to provide assistance elsewhere. AIDMI has no exit strategy because they continue providing relief, rehabilitation and development assistance to vulnerable communities. This implies also the capacity building provided by AIDMI's Learning Resources team in cooperation with the LRF team in the form of training sessions with the community. These involve comprehensive explanations of how insurance works, why it is beneficial, how to be a good policyholder, the differences between microcredit and microinsurance, and the importance of the Indian Insurance Regulatory Development Authority. Training courses are essential for the effective operation of Afat Vimo; through these, beneficiaries come to understand what to do in the event of a disaster in terms of how to make claims as per the legal and procedural requirements of the insurers and AIDMI.es are essential for the effective operation of Afat Vimo; through these, beneficiaries come to understand what to do in the event of a disaster in terms of how to make claims as per the legal and procedural requirements of the insurers and AIDMI.

Apart from providing educational services, AIDMI also collects the premiums and helps the disaster-affected to start the claim process.

Lessons to be Learnt As described above, the number of households covered by Afat Vimo has increased from an original membership of 829 in August 2004 to 5597 in February 2006. This has been a very successful development. Furthermore, the renewal rates for Afat Vimo have been encouraging with an average of 88% which is very positive for a scheme in its relative infancy. However, there are also a number of reasons why beneficiaries do not renew their policies.

The LRF team has observed that the following reasons are the most common explanations for non-renewal of policies: ? migration, ? inability to pay, ? no desire to renew because people do not see the benefit in insurance.

Regarding the scheme as a whole, one can state that it has proven to be possible to achieve relatively low insurance premiums as well as expanding the programme by spreading risks to other communities since not everyone will be affected by disaster. Apart from the success of the scheme, however, there are some challenges to cope with such as the limitations in the expansion of coverage since an augmentation of membership would invariably mean a substantial increase in operating costs?particularly if geographical coverage was to increase.

To learn more about the Afat Vimo insurance scheme, view www.southasiadisasters.net and www.proventionconsortium.org

[ Any views expressed in this article are those of the writer and not of Reuters. ]

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Source: Disaster Mitigation Institute (DMI) - India
AIDMI
Website: http://www.southasiadisasters.net

 
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