Four typhoons hit the Philippines in 2009. The consequences of
this 'climate-related disaster' were witnessed first-hand by
Karlijn Morsink, who is attached to the Twente Centre for Studies
of Technology and Sustainable Development (CSTM) at the University
of Twente. Morsink was in the area in October as part of her
research into the significance of micro-insurance for the
Philippines' sustainable development.
The UT postgraduate is working with, amongst others, the Dutch
development organisation Cordaid, which helps local organisations
in developing countries to set up micro-insurance projects. In the
course of her field study in the Philippines, Morsink saw how
destructive typhoons Ketsana and Parma had been. 'Much of the
capital, Manila, was under water; bridges had collapsed; people had
been made homeless or left without power. It was the very poorest
who tended to be hardest hit: in a very short space of time, many
lost everything.'
Typhoon seasons
It is an uncomfortable fact, according to Morsink, that while
world leaders talk about bringing CO2 emissions down to
safe levels, poor countries are already experiencing the physical
effects of global warming. 'If you talk to older Filipinos, they
will tell you that there used to be two predictable typhoon
seasons, and people planned when to sow and harvest their crops
accordingly. Now no one is quite sure when typhoons may strike,
which makes life very difficult for farmers. There is also a sense
that the typhoons are becoming more powerful. Ketsana was the worst
in forty-seven years.'
Quiet revolution
Against the background of such uncertainty, the Philippines
began what Morsink describes as a 'quiet revolution' about three
years ago: the introduction of an experimental form of
micro-finance. The region already had a well-established system of
micro-credit: personal loans for low-income households. The success
of that system opened the way for micro-insurance. And, thanks to
the work done on the ground by the Center for Agriculture and Rural
Development (CARD), the local context was familiar throughout the
Philippines. This contributed to introduction of the so-called PAID
Plan: a three-in-one insurance product aimed at low-income
families, consisting of (climate-related) disaster insurance,
personal injury insurance and life insurance.
Spirit of enterprise
This micro-insurance - 'the world's first typhoon insurance
scheme' - can serve as a lifeline for disadvantaged Filipinos. 'If
a poor family needs to rebuild their home after a natural disaster,
they are often forced to sell important means of production, such
as land, livestock or boats. So they easily find themselves
spiralling downward into extreme poverty. The great thing about the
PAID Plan is that these people are able to spread the risk. For as
little as €3.50 a year, they can get the reassurance of a starting
capital of 142 euros in the event of a natural disaster completely
destroying their home. The amount that the scheme pays out has been
chosen very carefully: not so high as to deter people from using
the traditional prevention mechanisms, but high enough to serve as
a safety net and ensure that enterprise continues to thrive. That
is hugely important. People need a basic level of security to
encourage them to take risks and invest in their own futures. So
the availability of micro-insurance makes a significant
contribution to sustainable development in a country such as the
Philippines.'
Plan with potential
In a month or two, Morsink hopes to publish the results of her
study into the impact of micro-insurance in the Philippines. 'Of
course, you have to be patient and avoid drawing hasty conclusions.
But I think it is safe to say that the micro-insurance phenomenon
is already beginning to bear fruit,' she reasons. 'Since the PAID
Plan was introduced in 2007, the product has been sold to 74,000
Filipino families, hundreds of whom have received pay-outs. For
example, typhoons Ketsana and Parma hit 86,000 CARD members, of
whom 227 had PAID Plan insurance, which provided them with
compensation. Admittedly, the numbers are small, but this is a
scheme with real potential. There is no reason why it shouldn't
grow into a sustainable business model if it can be scaled up to
help thousands or even millions of disadvantaged people.'
