The fact that Bangladesh is visited, on a regular basis, by environmental calamities like floods and droughts due to global warming, makes good sense for extending insurance coverage against related risks. Hence, the recent launching of a pilot project on flood insurance is a welcome step. A warmer and wetter climate in the future is likely to heighten the climatic risks such as floods, droughts and cyclones and increase vulnerability of rural people. Predictions are there that Bangladesh will be 1.5°C warmer and 4.0 per cent wetter by the 2050. Cyclone-induced tidal surges are also likely to turn severe due to a potential rise in sea-level of over 27 cm by that time.
Initiated by Oxfam, the first-ever flood insurance scheme has been launched in Sirajganj district. With a feature of fast payout to the flood-hit people, the index insurance product will cover 1, 661 poor families of 14 villages located in Sirajganj Sadar and Chowhali upzilas of the district on a pilot basis. The scheme aims to provide cash relief of up to Tk 8,000 per household in the event of a catastrophic flood. Mobile money transfer will also be introduced soon to transfer the money to the beneficiaries even faster. The CIRM Advisory Services (India), IWM, Pragati Insurance Ltd. (Bangladesh), Swiss Re, Manab Mukti Sangstha and Palli Karma Sahayak Foundation are to be jointly involved in implementation of the project. Once the pilot project clicks, it is expected to be replicated all over the country.
Although Bangladesh will have to rely on agriculture in the days ahead at least for food security, the crude reality is that it would remain exposed to natural calamities. And farmers will continue to be vulnerable to floods, droughts, pest attacks and other risks including lower prices of their produces. As a natural consequence, there has been a gradual migration of farmers, particularly males, to non-farm vocations. According to a recent study, the proportion of cultivators engaged in agriculture as their primary occupation has declined by 6.0 per cent and the share of agricultural wage labourers has become almost half. The proportion of workers engaged in rural non-farm activities has risen from 42 per cent in 1988 to roughly 54 per cent in recent years.
Millions of farmers had to bear the brunt of natural calamities in the past. The 1998 monsoon flood inundated over two-thirds of Bangladesh and caused damage and losses to crops and property worth over $2.0 billion, or 4.8 per cent of its gross domestic product (GDP). Similarly, the cyclone Sidr also caused extensive damage in 2007. The housing sector suffered the most, followed by agriculture and infrastructure. Most rural households depend on weather-sensitive sectors -- agriculture, fisheries, and livestock for their livelihood. Any disruption in their operations for reasons of nature or anything else hurts them economically.
The insurance companies need to be innovative in offering policies against loss of crops and other assets or valuables to the rural people in the event of natural calamities. Experiences in other countries show that farmers need more of the insurance products that cover the risks they primarily face. However, since the farmers are exposed to a variety of risks, they do not focus on only one type of insurance. On the other hand, health services and modern medicines are out of the reach of most of the rural people. Micro-insurance for health is one method to address their unmet health needs. In Bangladesh such an insurance coverage needs to be targeted towards the poor. The ultra-poor will then have access to some form of basic healthcare facilities at an affordable rate.
