Identifying the potential participation in natural disaster insurance: first attempt based on a national socio-economic survey in Indonesia

Abstract

Purpose This study aims to identify the regions with a high risk of natural disaster, estimate the proportion of households potentially participating in natural disaster insurance and analyze the relationship between disaster risk index and proportion of household potentially participating in natural disaster insurance. Design/methodology/approach Descriptive and quadrant analysis was applied on the 2019 Indonesia Disaster Risk Index (IRBI) scores and the 2019 National Socio-Economic Survey data. Findings The results showed there are only two categories of disaster risks in Indonesia based on IRBI categorization: “Medium” and “High.” Some districts in Aceh Province such as Simeuleu, Pidie Jaya and Banda Aceh City were observed to have a high proportion of households potentially participating in the natural disaster insurance while some in Jawa Tengah provinces have fairly low level even though they were categorized as high disaster-prone areas. Moreover, the quadrant analysis showed that 43 districts have high IRBI scores but low insurance participation rates with most discovered to be in Jawa Barat and Sumatera Selatan provinces. Originality/value Indonesia does not have a financial mitigation program up to the present time because almost all disaster resolutions are formulated based on emergency funds from the state budget even though it is important to use insurance schemes in all stages of disaster management. To the best of the authors’ knowledge, this study is the first attempt to identify households potentially participating in natural disaster insurance through the National Socio-Economic Survey in Indonesia.