The Demand for Disaster Microinsurance for Small Businesses in Urban Slums: The Results of Surveys in Three Indian Cities

BACKGROUND: Small informal businesses make up the core markets for many poor urban communities, providing essential goods, services, and livelihoods. Many of these communities and businesses exist in hazardous locations. In most cases, these business owners do not have access to proper coping mechanisms including risk transfer and lack resilience to shocks. Access to risk-transfer in the form of insurance for these small businesses is extremely limited. This demand survey is the first phase of an intervention to test disaster microinsurance for these businesses. Previous research has examined the demand for and value of microinsurance to protect poor households but not micro- and medium-sized informal urban businesses. OBJECTIVE: This study investigates knowledge about and demand for microinsurance among small informal business owners in three different cities of India. METHODS: Survey of all informal business owners (n=4919) identified through purposive sampling of the most vulnerable in three proposed study sites: Guwahati in Assam (n=1622), Puri in Odisha (n=1551) and Cuddalore in Tamil Nadu (n=1746). RESULTS: Our findings reflect that while small business owners largely did not know about disaster microinsurance, after describing it, a vast majority wanted to subscribe to such a program. Without it, they often rely on personal savings, forgo basic necessities, or take out costly loans that trap them in debt to cope with disasters. DISCUSSION: This research supports the need for more experiments on actual adoption patterns, feasibility studies, and innovative trial programs by governments, non-governmental organizations, and insurance providers.