Innovative Disaster Microinsurance for Small Informal Urban Businesses by Risk Transfer and Insurance
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The proposal directly meets the objective of the contest in terms of linking climate risk insurance with social protection programs. The focus on urban informal businesses, which typically do not have access to social protection and insurance products makes the proposal even more important. The concept of using cash transfer to incentivize disaster risk reduction and thereby hopefully reducing the cost of premium for climate risk insurance is robust. The proposal would have further benefited from (i) clear description of climate-related shocks faced by these communities; (ii) description of the type of informal businesses the population is dependent on and their supply chain; (iii) articulation on the design of parametric trigger and especially the confidence in the early warning systems in place for designing such triggers; (iv) and inclusion of capacity building activities - the type of actions that can be undertaken by these businesses to reduce disaster risk. The title of the proposal does not capture the essence of the project as it misses the social protection lens and the very fact that the proposal is trying to incentivize risk reduction in conjunction with risk transfer.
The logic is sound and the strategy for generating evidence to persuade the insurance sector to potentially offer new products targeting climate shock-vulnerable urban SMEs. While the need to create parametric products is mentioned the greatest impact of the project is however likely to be in the realm of evidence. Influence on the uptake of insurance and social protection actors largely a function of participation of the project proponents in dialogue processes. The likelihood of scale-up as suggested in the longer-term timescale is not very convincing based on the proposed relatively small randomized experiment.
Clear and good argument. The fact that it builds on an ongoing randomized trial is interesting and useful insights could be obtained in the efficacy of disaster microinsurance coverage together with conditional cash transfer program.
Thank you very much for your proposal to our contest. Our judges have selected your proposal to advance to the Semi-Finalists round. For the revision phase, we would like to provide you with some feedback from the judges that should help you improve your proposal and address open questions for the finalist round.
Judges found the overall idea of linking social assistance (such as cash transfer) to micro-insurance programs very appealing and directly in line with the objectives of the contest.
However, they noted that the proposed approach to provide cash transfer in a post-disaster context to the clients who already have access to micro-insurance, does not seem to add much value unless the interventions are designed for different layers of risk. As this is not clear from the proposal, clarifying this could strengthen the proposal. Disaster insurance does not directly help in risk reduction (though it can incentivize) and is mainly aimed at helping the clients to manage their residual risk and facilitate early recovery after a shock. On the other hand, predictable and timely cash transfer (especially when with conditions attached) can support in advancing risk reduction behavior among the clients. Thus, it would have been more interesting to see if the proposed instruments - cash transfer and disaster insurance - could be used as complementary measures to help reduce risk and manage residual risk respectively. It is not clear how the cash transfer program will be sustainable.
Furthermore, judges suggested that embedding measures contributing to more gender equality in the project could be another opportunity to further improve the proposal. This could be for example an indicator taking gender into account or controlling for unequal impacts, or instruments which encourage women to engage in urban businesses.
Finally, the judges were hoping for additional clarity on how the proposal links to the ongoing study. They also commented that the modalities of attaching social protection to the insurance products built in previous pilots could be further clarified. .
Please note also that, as semi-finalists to the contest, you are requested to provide a detailed budget for the spending of the seed funding (40,000 euros) that the team winning the Judge’s choice award will be granted for the implementation of their proposal.
Good luck and all the best,
The contest fellows
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