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Bouncing Back from Natural Disaster: Solving Individual and Economic Resilience with Micro Insurance

Black and white photograph of a man wading through a flooded street while pushing a bicycle taxi

Flood. Storm. Earthquake. Wildfire.

These are among the most common forms of natural hazard events experienced around the world, and they’re becoming more frequent as climate change takes hold. These natural hazards can strike at any moment and often displace people, halt livelihoods, and can even affect country economies.

Resilience – “the capacity to withstand or to recover quickly from difficulties” – is key to individuals and economies coping with the aftermath of catastrophic events. In financial recovery terms, this means having an emergency fund available to aid recovery, but for many this simply is not possible. The insurance industry can offer a lifeline to enable individuals to weather the storm during a natural hazard event and after the dust settles, water retreats, or fires are put out.

In today’s blog, we consider the immediate financial effects of natural hazard events and how micro insurance products, such as MiIncome, can play a vital role in helping individuals and communities bounce back when disaster strikes.

Let’s consider someone many of us see in the streets every day or have seen on news stories…

Weathering the Storm

Ali is a bicycle rickshaw rider living in a country prone to extreme weather. As a gig worker, his income is based on his ability to work. For Ali, that’s riding and receiving fares, so any disruption can be costly. The last few years have been tough. The pandemic halted his earnings as people were mandated to stay in their homes, so he had no choice but to break into his savings to keep on his feet. Now, any emergency expense or loss of income is a major issue, as living week to week, he has little left to save.

Recently, the country has experienced an extended dry spell followed by torrential rainstorms that lasted a couple of days, with more rain expected. In Ali’s hometown, flash flood waters have risen rapidly, resulting in streets resembling rivers, and ground floors of homes and buildings like dirty swimming pools. Lives are on hold as flooding impedes movement, forcing many shops to close and utilities to be switched off.

Ali is attempting to work as usual, but with flood water up to his waist and being unable to see debris around his feet, he soon concedes and returns home, resulting in immediate loss of income. With more rain forecast, he has no idea when he’ll return to the road. To add insult to financial injury, with water and electricity supplies shut off, he needs to buy bottled water and much of his food could go to waste, requiring replacement when normality resumes – another inconvenience he could really do without.

A Global Protection Gap

Ali has an immediate need to access money to survive the flood, but dwindled savings will make day-to-day life challenging.

Worldwide, much like Ali, high percentages of populations do not have emergency funds to help in the wake of an unexpected event caused by natural hazards. For example, 75% of Indian millennials claim they do not have an emergency fund and 63% of employees in the US would be unable to cover a $500 emergency expense. Similar stories have also been reported this year in the UK and Australia.

This begs the question – how can micro insurance be used to improve individual and national economic resilience in areas vulnerable to natural hazards?

MiIncome for Individual Financial Resilience

MiIncome digital reinsurance solution is our affordable, accessible, and relevant loss of income product which ensures people are adequately protected from threats to their livelihoods and incomes. We work with insurers and platform companies to support their own income protection products by tailoring MiIncome to their business and target demographic’s needs.

The MiIncome Resilience trigger provides coverage for loss of income due to natural hazards and extreme weather events. Coverage is parametric, enabling our insurance and platform partners to provide fast inconvenience pay-outs to their customers when insured events are met, to help navigate the issues they face in the moment. Going back to our earlier scenario, with coverage supported by MiIncome in place, Ali’s income gap will be softened, enabling him to afford emergency expenses, plug his lost income, and ride out the weather event.

This is of particular help to gig workers, especially those who rely on their ability to travel. MiIncome proves itself an invaluable resource for a demographic who already face challenges getting traditional income insurance.

MiIncome for National Economic Resilience

Branching out further, MiIncome can be utilised at a national scale to help aid a country’s economy in the wake of natural hazards and extreme weather.

According to SwissRe, global economic loss in 2022 mounted to $275 billion, of which only 45% ($125B) was insured. This large protection gap threatens economic financial resilience as individuals and small businesses struggle to recover from the effects of natural hazards.

Where countries have a large proportion of gig and MSME entrepreneurs operating, a natural hazard event can temporarily remove many of these workers from the economy. Government-backed micro insurance programs can be offered to ensure that their local economy continues to operate and grow while people and small businesses recover from disaster.

Disaster Response Micro Insurance Case Studies

To better understand the practical impact of micro insurance on a national scale in post-disaster scenarios, let’s look at a few examples:

  1. The Philippines: The Philippines is a nation that frequently faces extreme weather, including typhoons and earthquakes. Micro insurance programs, supported by both the government and local organisations, have allowed vulnerable communities to rebuild their homes and livelihoods after devastating events.
  2. India: The Indian government has implemented micro insurance programs that specifically target agricultural communities. These policies provide coverage against crop failure due to extreme weather events, ensuring that farmers can recover and continue their agricultural activities even after a poor harvest.
  3. Haiti: After the devastating earthquake in 2010, micro insurance played a crucial role in helping Haitian families rebuild their homes. Local organizations provided affordable micro insurance options, enabling communities to recover from this catastrophic event.

Helping People Recover from Natural Hazards with MiIncome Resilience

Natural hazards and extreme weather can hugely affect individuals in the moment, with a need for quick access to funds to cover short term loss of income, or in more serious circumstances provide cash to survive. Country’s economies can also suffer disruption while workers are unable to work and pay for goods and services.

With MiIncome Resilience, workers can access policies designed to help them in their hour of need with fast inconvenience payments*, which may provide a real lifeline when navigating a natural disaster. On a grander scale, governments can protect their citizens with government-backed insurance, but also gain a safety net that ensures that their economies remain stable and can weather the storm, while they focus on disaster recovery.

Tell me more about MiIncome Resilience

Thanks for reading our article. To learn more about MiIncome, visit our product page and get in touch with us below to discuss how we can help your business put money in your customers’ pockets in their time of need.

Further reading

Involuntary Unemployment: Protecting Employees from Income Loss

Life Happens… Protecting Gig Workers from Income Loss

No Income, No Problem! How MiIncome Enables Customer Support During Income Disruption

* 80% of claims turned around within 48 hours, May–Dec 2023.