News eDaily19 May 2017

India:Proposal for govt & insurers to cooperate in home insurance

| 19 May 2017

The government can consider introducing affordable home insurance schemes in association with insurance companies that would cover losses to property due to catastrophic events, a senior insurance industry executive has proposed.

Mr Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, in an article in MoneyControl, says that index-based home insurance schemes could be set up similar to the weather based crop insurance schemes. This could be implemented by states which can opt for covers that best suit their NAT Cat exposures. The schemes can be implemented in association with insurance providers and the premium can be collected along with property tax.

“For instance, a pre-decided amount of rainfall in a flood prone area or an earthquake of a certain magnitude in the earthquake prone parts of the country, if crossed, could trigger the property damage claim making the insurance company liable to pay. Having these pre-decided terms will ensure transparency and physical survey/inspection will not be required, leading to faster relief to the affected,” said Mr Singhel.

In this regard, the Real Estate Regulation and Development Act (RERA), seen as a boon to homebuyers, will also be able to help increase insurance penetration in the country.

The law promotes transparency and standardisation in the real estate sector. It addresses and seeks to resolve major consumer-related issues in acquiring property in India like delays, price, quality of construction, title and other changes.

RERA, which took effect on 1 May 2016, stipulates that states have to set up regulatory authorities by 30 April 2017, and notify their version of rules and introduce legislation for the same, as land is a state subject and RERA is a model law.

Mr Singhel says that if RERA authorities partner with insurance companies to address and include the aspect of securing the home in their purview, the move could be instrumental in changing the landscape.

He points out that the floods that ravaged Chennai in November- December 2015 caused massive catastrophic losses. At Bajaj Allianz, of the nearly 8,000 claims the company paid in the aftermath of the Chennai floods, only 1% pertained to home insurance cover.

Currently, for losses incurred after a natural disaster, payouts are made from the Prime Minister Relief funds and National Disaster Management Agency's (NDMA) funds. According to a recent United Nations Office for Disaster Risk Reduction report, India had 19 events of natural disasters, including floods, droughts and heat waves, in 2015 and an economic loss to the state exchequer of more than US$3 billion from these disasters.


 

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