The Initiative
After the devastating 2001 Gujarat earthquake, about 15 million directly or indirectly affected faced disaster-induced financial losses even after having benefited from relief support. A survey revealed that only two percent had been covered by an insurance scheme during the earthquake. The Regional Risk Transfer Initiative was then designed in cooperation with insurance providers as a complement to AIDMI's Livelihood Relief Fund, having the microinsurance scheme, Afat Vimo, as its main tool.

Afat Vimo covers its policyholders for damages or losses valuing up to $ 1,744 for non-life assets and $ 465 for loss of life. The scheme covers 19 disasters including fires, explosions, riots, cyclones, earthquakes and landslides. The policy is available for an annual premium of less than $ 5. Damage to the policyholders' houses, household assets, trade-stock and losses of wages due to accidents are covered. The earning household member's life is also covered. The poor amongst disaster victims are repeatedly exposed to, affected and impoverished by disasters. Their access to financial services is limited, but slowly microinsurance is emerging as an opportunity for them5. Afat Vimo was developed bearing in mind the local conditions and contexts.

The Outcome
Feedback from policyholders who have made claims has been positive and encouraging for keeping up the work with the scheme. During the last year, 144 claims have been filed. Out of these 120 have been successfully settled. During the last year, 4251 new policies were bought in different places, such as flood-affected Gujarat, Tamil Nadu and Jammu and Kashmir.

A participatory review of this Regional Risk Transfer Initiative was conducted in January 2007. The review found that the scheme was clearly welcomed by clients and that there was pressure to extend it. The practical problems had been addressed. The claim-making process was found to be rapid and flexible in adjusting and clarifying the terms of insurance. The main value of microinsurance lies in limiting indebtedness that quickly can be triggered by an event such as disaster, accident or death.

To strengthen this initiative, cross-sector linkages were promoted and the existing partnership with United India Insurance Company Ltd., Life Insurance Corporation of India and AICIL was reinforced. Also, further contacts have been made with actors in India and other countries that have the same initiative, so that good practices can be exchanged.

Finally, it can be said that a reflection of the recognised success of this disaster micro-insurance scheme for low-income groups is the inclusion of one AIDMI's article on the ISDR publication "Building Disaster Resilient Communities - Good Practices and Lessons Learned".

Inclusiveness
One of the good practice in Afat Vimo lies on the fact that the risk is transferred from the individual level to community or inter-community levels, which include groups based in different geographic locations and that are not equally exposed to disasters. The fact that the premium is kept at such a low level makes it affordable to low-income groups that otherwise would not have accessed any risk transfer initiative.

Afat Vimo represents an innovative approach to risk identification, pooling and transfer that recognises the fact the majority of poor disaster victims have little or no access to risk transfer schemes. A recent study by the International Labour Organisation revealed that 45% of microinsurance schemes offered in India cover only one single disaster, while Afat Vimo covers 19. This makes the product more attractive to clients. Another aspect of Afat Vimo that sets it apart from other microinsurance schemes is the extensive range of eventualities covered under the policy.

Afat Vimo, being a financial tool for risk sharing, reduces the policyholders' underlying risks and offers financial protection. In addition to the policy itself, the policyholders are supported with micro-mitigation measures such as fire-safety, seismic-safe construction practices and business development services.

Lessons learned
AIDMI has learned that operational know-how on promoting risk identification, risk transfer, risk pooling and advocacy in favour of disaster risk transfer from small businesses is hugely lacking throughout South Asia. The project has also taught us that extending microinsurance services to the poor faces many challenges at micro level such as affordability, access, services, delivery, lower renewal rates, understanding of the concept of insurance and sustainability.

A microinsurance scheme in itself is not enough for achieving disaster reduction, but in interplay with other microfinance services and risk mitigation measures the viability can be ensured. Challenges in enhancing benefits of microinsurance to the poor at the macro level include creation of incentives for risk reduction, balancing public-private roles and responsibilities and making up-to-date data available to decision-makers.

Furthermore, previous surveys showed that insurance companies are willing to offer insurance packages affordable to poor people and even global insurances begin to extend their business in the region and for poorer people7. Governments are also eager to develop viable disaster insurance offers as an alternative to relief aid. AIDMI's long-time partner, ProVention Consortium is constantly working on risk transfer mechanisms and the possibility of including disaster risk reduction in corporate social responsibility.

Risk Transfer Initiatives

Including Offspring

Including Small Businesses

Risk Reduction

Knowledge Management

Disaster Response

Policy Advocacy