Blog with us about the GPDRR13

Lack of trust puts at risk insurance and government collaboration

Knowing that the frequency of natural disasters will increase in the future, the market opportunities for insurance companies are enormous. Insurers can work at the local level as at the international level. Often banks ask for catastrophe insurance as a precondition for lending money to buy a house. Governments do not always have the capacity nor the knowledge to insure their citizens. Therefore, it is more efficient to work and collaborate with insurance companies.

However, the insurance sector lacks of trust. Stakeholders often see insurers as the bad guys who steal your money. Corruption, lack of understanding and unreliable risk estimates, all have contributed to weaken insurers’ reputation and expertise. A better insight of insurance instruments to the public is imperative to allow trust.

Commercial insurance or other finance instruments must be an integral part of DRR. They promote risk reductions by giving financial stability and provide funds to cope with disasters damages. Well insured countries may attract more investors and well insured household can look at the future more optimistically. 

Insurers serve individuals, governments, NGOs and enterprises by preventing risks and contributing to faster recovery.  By collaborating with them, decision-makers can design better solutions that will reduce losses and increase resilience to disasters.  Their participation is crucial in DDR management.

Insurance in DRR is about sharing risks between private and public sectors. In case of governments, they contract so-called reinsurance. Reinsurers are insurers that operate at the international level, usually transnational corporations. Their capacity to absorb risk is bigger than local insurers. 

In doing so, the insurance and reinsurance sectors contribute to reduce the dependence on the government funds in post-disaster period and promote investment in disaster risk reduction. Governments assisted by insurers and reinsurers should enhance private property disaster insurance, agriculture insurance and micro-insurance among population living in regions at risk.

To fight bad reputation, not only stakeholders should make an effort to understand insurers’ point of view. The insurance and reinsurance sector must show more transparency in their work and objectives. Transactions and policies look very complex, but not impossible to explain. In conclusion, transparency is probable the key word when it comes to build trust. 

reported by Vanessa Esteves