India ranks among the top 10 countries when it comes to natural disaster risks according to Bajaj Allianz. And with natural disasters like the Jammu & Kashmir floods, Uttarakhand landslides, cyclone HudHud becoming more frequent, the firm believe that India's ranking in flood risk may increase further.
India along with countries like Japan & Philippines makes to the top 10 natural disaster list with propensity for natural disaster such as earthquake, cyclone and floods. This means that insurance firm covering natural disasters need to take a higher insurance cover, but premiums in India are lower than countries like Philippines.
"India is high on the peril ranking list, as it has floods, earthquake and cyclones. At present India is modeled on earthquake disaster, unfortunately there is not much of a modeling done on floods. Flood is a difficult natural disaster to manage and model as India as a country has a topography that is constantly changing," said Tapan Singhel, MD & CEO, Bajaj Allianz.
Insurance companies have data compliers who have models on natural catastrophes like earthquakes. Bajaj Allianz has built models on earthquake as it also has historical data to fall on but for flood the company has started to create model only on the 26/7 Mumbai floods.
Bajaj Allianz was one of the insurance companies that had high exposure to claims from the J&K flooding. The company settled 28,000 claims and disbursed Rs 1,000 crore in a period of three-three-and-a-half months. Bajaj Allianz has a 23-24% market share in J&K.
In early September of 2014, monsoon rains in the northern state of Jammu and Kashmir in India and the neighbouring region in Pakistan resulted in the worst flooding in 60 years. At least 665 perished and over 200,000 houses were destroyed. Together, the total losses in India and Pakistan were $5.9 billion (Rs 36,698 crore), and insured losses were at least $0.2 billion (Rs 1,244 crore). The total losses from the destruction of housing in India were at $4.4 billion (Rs 27,368 crore).
Cyclone HudHud caused the largest loss from a tropical cyclone, said the study. The total losses were estimated at $7 billion (Rs 43,540 crore), the largest of all natural catastrophes in the world in 2014. However, the insured losses were a fraction of the total at just $0.6 billion (Rs 3,732 crore).
Despite an increase in natural calamities the number of people buying home insurance or insurance for natural disaster has not increased. "Such natural disasters create interest for just a few weeks and then its business as usual. In India less than one per cent of home buyers buy insurance coverage. Those who have been buying are doing so because of the home loan they have and that mandates an insurance plan," said Singhel.
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