Post-Disaster

We have already seen how the increased cash flow brought in by disaster, is often diverted to non-relief works. Most offensive are diversions for bureaucratic and other normal government expenditure.

Most frustrating is the fact that the government would dream up different schemes, which are of little or dubious value, but nonetheless eat into funds meant for disaster relief. For example in the case of the Bhopal disaster, the government passed legislation that they would fight the compensation case against Union Carbide rather than allow individual victims to do so. And then a lot of the money has been spent on developing so called health infrastructure in the form of specialty hospitals.

Similar to this is the haste with which a so-called Tsunami Jan Bima Yojana[i] was launched. Through this, a sum of Rs. 36.5 crores rupees has been transferred as premiums for 4.57 lakh families to the Insurance companies. Wouldn’t it have been more prudent to spend the Rs.36 crores on the public hospitals in the Tsunami affected hospitals,. where the poor in these areas would any case for their treatment? The basic approach of insurance especially for limited one-time coverage like Rs.15,000/-, is that they cover their costs over large numbers. And given that there have been absolutely no collection costs, barring the money spent on the launch functions, the premiums have come as a bonanza for insurance companies. Since the government is already committing 36 crores as premium wouldn’t this cover the same families, when they go the public hospitals, at a cheaper cost, while at the same time help alleviate the problems faced by public government hospitals?

VIEW OF INTERNATIONAL FINANCING AGENCIES is seen in this extract from an article in Finance & development, A quarterly magazine of the IMF March 2007, Volume 44, Number 1

To meet their immediate expenditure needs, disaster-prone developing countries often rely on post disaster financing in the form of grants and loans from external donors. Their reliance on such flows, however, has considerable disadvantages. First, it takes a great deal of time before donor resources are committed and even more time before the funds are actually made available. Second, there may be competition for donor resources from other countries with relief needs at the same time.

But if countries insured themselves against disaster, they would secure at least some of the needed resources in advance. Such insurance is not a remote theoretical prospect. The experiences of high-income countries, in particular the United States and Japan, have shown that many natural perils are insurable, and markets for disaster risk insurance are well established there.

Given trends in catastrophe insurance pricing and the available resources in disaster-prone countries, these countries will probably need to receive donor contributions in advance to pay insurance premiums. But a shift in donor financing from post- to pre disaster would still have important benefits for both parties. For the recipients, it would make post disaster public finance conditions more predictable because the amount of insurance financing available would be known in advance. For donors, it would help smooth cash flow by converting "if and when" outlays into predictable insurance premiums. It might also give donors greater leverage over preventive policies (such as building codes). Last, but not least, it would reduce the perverse incentives that recipient countries face in their dependence on post disaster donor financing. Indeed, vulnerable countries currently often have little incentive to set aside fiscal savings or take preventive measures for natural disasters, because such preparation might reduce donor support following an adverse event (the so-called Samaritan's dilemma). With predictable insurance payouts, countries retain incentives for fiscal provisioning and preventive structural policies.

--- Time to Master Disaster by David Hofman

The mediclaim type insurance would cover hospitalisation expenses up to Rs.30, 000 per family a year and carried sub-limits for various items of hospitalisation. Under this, The members of the tsunami-affected families will be provided with health card through which they will get treatment from the listed hospitals. Despite the scheme being announced with much fanfare, no one seems to be aware of the scheme, or what they have to do to be covered under this scheme. Thus the insurance companies seem to be sitting on “our money”.

The same approach of providing disaster insurance from public funds, has been touted by the International Finance Corporations, on the guise that if and when a disaster occurs, there is more predictability of getting funds required for rehabilitation. What these means is that governments will keep on pumping in higher and higher premiums into insurance companies, and when the time for disbursal comes each one of us will have to go to insurance companies filling forms, submitting documents etc to get compensations, and relief?

This kind of logic is of predictable payments post disaster, is an insult to the large public who has so generously responded to situations like these. The only worthwhile insurance is the insurance of the herd, that is the fact that entire humanity mobilises itself, not out of charity, but out of a sense of being part of a family, where the risk of disaster is spread!