There has been a notable progress in the efforts to bring out an exclusive insurance cover for natural catastrophe as both the Home and Finance Ministries are presently examining a Task Force report on implementing a programme in the country.
There have been co-ordinated efforts among all stakeholders that include Ministry of Home Affairs (MHA), Department of Financial Services (DFS) of the Ministry of Finance, NDMA (National Disaster Management Authority) and IRDA (Insurance Regulatory and Development Authority) in the past year to identify solutions towards disaster relief and risk mitigation through insurance mechanism.
“Discussions papers prepared and deliberated at various levels in the Government resulted in identifying certain key areas to be pursued towards disaster risk mitigation. Following this, a Task Force prepared suggestions for implementation. At present, this Task force report is receiving the attention of DFS and MHA,” said R Chandrasekaran, Secretary General, General Insurance Council.
“Actually, all Insurance products cover loss caused by natural disasters. But, insurers opine that a stand alone (exclusive) natural catastrophe insurance product will amount to anti-selection against insurers. At the same time, insurers also feel that there could be an exclusive disaster insurance product with appropriate premium / claim subsidy from the government (as in the case of National Crop Insurance Schemes) to cover a significant segment of the population (say, a district or a few districts as a whole,” he added.
At present, government disaster relief funds are meant only for relief and rehabilitation immediately following a disaster and not for reconstruction of the assets / affected areas.
Disasters are classified as natural or man-made. Man-made disasters include collapse of buildings, stampede and such other disasters where a large number of public get affected. One suggestion being made is to make public (Third Party) liability covers mandatory for public places. There is also a suggestion to enable NDRF (National Disaster Response Force and SDRF (State Disaster Response Fund) as well as other critical infrastructure establishments to buy parametric insurance covers to augment their financial capabilities to bear losses arising out of severe disasters.
“Parametric products would require a well documented simulation models for various disasters such as earthquakes, floods or cyclones. These models are being developed for India and for these three perils there is significant progress in the validity of model results,” said Mr.Chandrasekaran.
Referring to models in other markets, he pointed out that in countries that were prone to natural catastrophes, either insurance awareness was high or such insurances were increasingly getting mandated by governments. “This is one of the solutions being suggested for providing disaster insurance covers,” he added.
Chola MS General Insurance’s Managing Director S S Gopala Rathnam, who is part of many insurance industry committees, stated that a carefully orchestrated disaster insurance scheme would not only provide cover for losses, but also result in a lot of savings for the government. “Things are definitely moving in the right direction over the past few months” he added.
