Insurance for climate change
New Scientist has this article about how insurance could be used to at least partially mitigate the problems that poor people around the world might face as the result of some potential future climate change (warming? cooling? Krugmaning?).
As well as providing protection from the increasingly unpredictable weather, the premiums could also be a powerful way to get poor people to adapt to climate change by encouraging them to invest in measures like drought-resistant crops. Is this profit-driven endeavour too good to be true?
What’s so sadly amusing about this is that New Scientist describes it as if it’s some brilliant new discovery, but free market economists have been making that exact argument for decades. The magazine even tries to link it to tyrannical statists like former U.N. Secretary General Kofi Annan (saying he’s a supporter of it), with the implication I guess being that it’s not really a free market process (because as the government schools teach us, nothing about the free market can help poor people)!
Now a different type of insurance scheme is being rolled out in Adi Ha and many other places in Africa, Latin America and Asia, backed by corporate giants such as Swiss Re and Munich Re. Instead of insuring against lost crops, “index insurance” protects farmers against the vagaries of the weather. For example, if rain gauges at local weather stations drop below a certain level, insurance companies can automatically transfer a payout to farmers without having to visit them.
The fact is, it’s long been a profitable business to insure farmers against lost crops, and insurance companies have incentives to come up with ever more creative ways to help people manage risk (i.e. this new index insurance). It should be no surprise that they’re doing it again and helping (as free markets always do) the poorest of the poor, those who are preyed on by governments.
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