Affordable insurance pushed for poor households

MANILA, Philippines — Poverty alleviation programs for households near the poverty line should include the provision of affordable insurance and specialized access to credit to help them cope with economic shocks from extreme weather conditions, according to a report by the Ateneo de Manila University (ADMU).

According to the policy report titled “Impact of extreme rainfall days on the well-being of the households in the formal and informal sectors,” weather events like typhoons can push informal sector workers into poverty from which it they may not be able to recover because of limited resources.

The paper was authored by ADMU economists Majah-Leah Ravago, Gerald Gracius Pascua and Loubill Dayne Aceron, as well as weather specialists Emilio Gozo of the Manila Observatory, and Gemma Narisma of the atmospheric science program of ADMU.

The Philippines is among the most vulnerable countries to extreme weather conditions in the world, with several events disturbing economic activity all-year-round such as typhoons, storm surges, and intense flooding, among others.

The study found that poorer households, especially those in rural areas, are more likely to suffer from the impact of such disasters because other than having extremely limited resources to bounce back, they are also the least prepared because of they tend to live in areas that are prone to disaster and are often not educated on risk management.

Many of them also work in the informal sector, making their sources of income less secure than those with formal employment.

“For a country such as the Philippines, which has a large informal sector, the adverse effects of extreme weather events are not negligible, and potentially irreversible in this sector of the economy,” said the authors.

The paper pointed out that while households deriving their income from the formal sector of the economy stand to lose more in the event of natural disasters, they can recover more easily because they have more resources.

“However, the adverse impact to the informal households may be irreversible given their weak capability to recover and their limited ability to smooth out consumption even during days with normal rainfall,” said the paper.

To prevent more low-income households from sliding into poverty during the onslaught of extreme weather, the authors urged the government to provide targeted social protection coverage.

Policies on poverty alleviation can include the provision of affordable insurance and specialized access to credit to soften the blow of weather shocks.

Education campaign about the impact of disasters for these households may also help them recover faster from the economic fallout from weather shocks.