The Program on Non-Profit Organizations (PONPO) welcomed Mihir Bhatt, founder and director of All India Disaster Mitigation Institute, to SOM this fall. He addressed a room of first-year and second-year business school students, as well as professors and professionals interested in his philosophy and practice around micro-insurance in post-disaster scenarios in India.
The All India Disaster Mitigation Institute (AIDMI) is a non-governMihir Bhattmental organization based in Gujarat, India, that works to bridge the gap between policy, practice and research related to disaster risk mitigation and reduction. Bhatt is also currently engaged in evaluating the humanitarian work of both UN and international non-governmental agencies on Tsunami relief and rehabilitation activities in coastal areas of south India, Sri Lanka, and Indonesia. Among his many achievements, Bhatt received the Russell E. Train Institutional Fellowship from the World Wildlife Fund (1997) for building an action-focused research institution focused on risk reduction in the global South, and an Ashoka International Fellowship (2004) for his innovative approach to using social enterprise for long-term recovery of disaster victims.
Most recently, Bhatt set up a risk transfer initiative — including disaster insurance and risk mitigation — for 12,000 micro-entrepreneurs in AIDMI’s Livelihood Relief Fund. Bhatt describes micro-insurance as “the protection of low-income people against specific perils, in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved.” He articulated the huge economic cost of natural disasters to fragile economies and the extraordinary amount of money spent each year by government agencies to support the formal sector in recovery (e.g., the government of India spends approximately $286 million per year via its Calamity Relief Fund), but noted that these initiatives often overlook the needs of micro-entrepreneurs and those who are in greatest need of assistance.
“Afat Vimo” is a disaster insurance product offered by his organization, which covers both life and non-life losses for more than 3,700 clients in Gujarat. The typical Afat Vimo client has assets worth Rs. 13,000 (US$285) with an annual income of Rs. 16,000-24,000 (US$350-525) and owns his/her micro-business. In exchange for a one-time upfront fee worth approximately three days salary, Afat Vimo provides coverage on losses or damages to house, stock-in-trade, or loss of work due to accident and death of earning family member up to Rs. 75,000 (US$1,900). The program also invests in education programs around risk mitigation with the goal of breaking the cycle of poverty due to natural disaster.
While this program is designed both to be financially viable and to have a significant impact the lives of many families throughout the region, Bhatt described a variety of challenges to the growth and scaling of Afat Vimo. Challenges include: low levels of private sector interest, the establishment of an efficient collection system, tools to mitigate risk for clients, financing to pilot the program without clear pathways to reach scale, and complexity around appropriate risk pricing.
As Bhatt and his team evaluate the success of the program, they are specifically examining impact measures like recovery time with and without insurance, renewal rates andrepayment schedules. AIDMI also is considering immediate next steps to reach a broader client base. For example, AIDMI is consulting to the UN Development Program on their disaster risk management program. The organization is also working with smaller humanitarian agencies to help them set up their own insurance programs. Finally, AIDMI partners with the Government of India and its national disaster relief authority to further promote the adoption of micro-insurance tactics to protect the country’s most vulnerable citizens.