Why It Is Absolutely Necessary To Have Insurance For Natural Disasters

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According to the Economic Survey 2018, as reported by the Times of India, the penetration of insurance in the country is shamefully less than 5%. In other words, majority of the citizens in the country aren’t equipped to give themselves and their family financial backup if something does go wrong. The lack of penetration of insurance in the country was visible when Chennai and Kerala recently faced natural disasters which resulted in severe consequential economic losses. As per reports, the recent Kerala floods which brought the state to a standstill resulted in economic losses almost to the tune of Rs.20,000 crore. In comparison, insurers reported that claims worth only up to Rs.1,000 crore were made and fulfilled during this period – just 5% of the total losses faced by the state.  

In response to this, Sanjay Datta, the chief of underwriting at ICICI Lombard General Insurance, said that the numbers just prove that the insurance penetration percentage is still very low in India.. He added by saying that risk awareness among citizens is the need of the hour.  An official from Bajaj Allianz General Insurance also sais that the recent natural disasters also showcase how people value the loss of unclaimed inruance premiums as far greater than the economic losses caused by natural disasters. This belief is a major reason for low insurance penetration, along with the belief held by many that they are highly unlikely to suffer losses due to a natural disaster.  

The COO of Future Generali India Insurance said that citizens in the country need to understand that by being insured, if a natural disaster does strike, their financial losses are taken care of by the insurer, and this provides financial backup in the most trying times. However, he added by saying that making insurance mandatory for citizens might not solve the problem, as citizens might not bother to renew their policies. He concluded by saying that regarding motor insurance, the recent directive of the Supreme Court for long-term third-party motor insurance might help in some way.  

Types of insurance that citizens need to have 

When it comes to dealing with a natural disaster, a single insurance policy will not suffice as financial backup to the individual. An individual will require a life insurance policy, motor insurance policy and a home insurance policy to get complete financial backup following a natural disaster:  

  • Life Insurance 

A life insurance policy will offer financial backup to the loved ones of the policyholder, if the natural disaster such as a flood, earthquake, fire, cyclone, landslide or any unforeseen circumstance results in the death of the policyholder. The death benefit that will be made to the nominee or dependents or family members will help them survive financially for a certain period at least.  

  • Motor Insurance 

One of the main insurances that is often overlooked by citizens of India is motor insurance. Following the recent Chennai and Kerala floods, a huge number of vehicles were submerged and were unusable. For those who did not have motor insurance coverage for their vehicle, the cost to repair the damage would have to have been met by them. With around 60% of the vehicles on the roads of India being uninsured according to a study, an even lesser nuber are equipped to get coverage in the case of a natural disaster. In order to claim insurance coverage for the vehicle, the vehicle owner needs to have a comprehensive motor insurance policy and not just a third-party insurance policy which is mandatory as per the rules set by the Government of India. The comprehensive car insurance policy offers coverage following situations such as an earthquake, flood, landslide, lightning, fire, etc.  

  • Home Insurance 

Considering the cost of building or purchasing a house, the home insurance premiums which offer coverage if the house is damaged following a fire, earthquake, flood, landslide, etc., is negligible. For coverage for natural disasters, policyholders need to specifically purchase plans that caters to this need. Top insurers such as ICICI Lombard, HDFC ERGO, TATA AIG, and Bharti AXA, offer home insurance policies that comes with complete financial protection and coverage if the house is damaged or completely ruined following a natural disaster.  

While experts believe that risk awareness among the citizens of the country needs to get better, and people need to start investing in insurance policies that would offer financial backup in the worst situations, a lot of people refrain from purchasing policies as they are unsure whether the promises as stated in the policy wordings will be met by the insurer when needed the most. To set the record straight, following the Kerala floods, the Insurance Regulatory Development Authority of India directed insurers present in the state to simplify the claims procedure to aid those affected. Insurers such as Bajaj Allianz General Insurance, ICICI Lombard General Insurance, and Edelweiss Tokio Life Insurance set up special teams in Kerala to receive claims and simplified the claims process to a great extent. All that affected policyholders needed to do was to intimate the insurer and submit basic KYC documentation to receive the claim amount in a short time, in some cases, even less than 24 hours. In the case of deaths of policyholders following the ravaging floods, Bajaj Allianz Life Insurance even accepted just the name of the policyholder as proof from the hospital, police, armed forces, or government authorities, to make the death benefit payout to the surviving members of the family.