The Insurance Regulatory and Development Authority (IRDA) on Wednesday said mandating lenders to take catastrophic (CAT) insurance irrespective of the location of the properties for which they have loaned money is one way of popularising insurance against disasters.
"We are still groping for solutions to insure an individual against natural disasters and we have not as yet evolved a standalone insurance product for natural catastrophes," said IRDA Chairman J Hari Narayan.
He was in New Delhi to address a seminar on "Role of Insurers and Reinsurers in Achieving the Objectives of National Policy on Disaster Management" organised by FICCI, IRDA and National Disaster Management Authority (NDMA).
Emphasizing the need to insure individual property and its contents, Narayan said that bulk of the response in compensation on account of natural disasters came from the government through budgeted funds, which are largely given for restoration of public buildings, humanitarian relief and writing off of crop loans.
Loss of individual family assets is not taken care of.
Speaking to IANS, M Ramadoss, chairman and managing director, New India Assurance Company, said: "Only people who live in risk (earthquake, flood and other natural disasters) prone areas take such covers and others don't. As such there is an adverse selection of risks against insurers. We do have adequate data on the catastrophic losses in India."
Package policies like householders insurance policy have inbuilt protection against natural disasters like earthquake, flood. But for other properties a policyholder has to pay extra to cover earthquake risk.
He can opt out of flood risk damage and get a discount in his premium.
FICCI Secretary General Amit Mitra referred to the nascent insurance and reinsurance industry in India and said the market is still under developed and grossly under-penetrated.
The demand for risk transfer instruments in emerging markets like India is often constrained by market gaps, including a lack of regulatory frameworks, limited data on disaster risk, a lack of a culture of risk financing and the reluctance of large reinsurance market players to invest in the development of small risk markets.
According to him, the coverage for natural disasters is particularly limited, and even where hazard coverage exists, it is usually limited to major industrial and commercial properties, and wealthier households. Reaching the poor continues to remain a challenge.
NDMA Vice Chairman NC Vij said all the government constructions should be disaster resilient.
He said detailed instructions have been given to the government to include this element in the project report itself.