Calamities - the insurance dimension

By S. Swaminathan

The natural catastrophe that fell on Gujarat on the Republic Day last month, even if its colossal toll of human lives and property is as yet only a subject of tremulous conjecture, has brought up many issues of public policy.

Setting up a National Committee on Disaster Management (which is in effect an all-party political enclave rather than a group of non-partisan experts on relief, rehabilitation and reconstruction) is a typical gambit in pre-empting the politicisation of what should be seen as a massive national challenge transcending the customary bickerings and one-upmanship in the political arena.

The report that the committee, at its first meeting in New Delhi on Sunday, endorsed the suggestion of the Prime Minister, Mr. Atal Behari Vajpayee, on setting up a working group to prepare a long-term plan on tackling natural calamities or man-made disasters (with taskforces popping up in due course) is not particularly inspiring.

The earthquake that devastated Gujarat was, of course, an unprecedented calamity in post-Independent India which has found the State Government and the Centre in a pronounced state of inadequacy in terms of the requisite agility and organising ability.

There are many horror stories coming from Ahmedabad, Bhuj and elsewhere in Kutch, about gross violations of basic building norms which could have been made possible only through collusion between property developers and public officials at different layers of the administration. Hence the refrain: ``Earthquakes do not kill, but buildings do.''

Although it will be erroneous to play up the greedy commercialism involved in high-rise buildings being promoted all over the country by get-rich-quick real estate ``sharks'' to the point where the severe earthquake itself is not seen as the proximate cause of the human devastation, no national strategy for tackling such calamities can ignore the critical need to discipline the building trade.

The failure of insurance

Nobody knows what the exposure of the Life Insurance Corporation of India and the General Insurance Corporation has been in Gujarat, to be able to estimate how much the country's monopoly insurance companies would provide by way of compensation to the people who have lost their kith and property owing to the quake. Whether it is Ahmedabad or Bhuj or Rajkot or any other town, it is appalling that many who have lost all their earthly possessions are seen queuing up before relief camps or even trucks carrying food and water.

If at all people had some insurance cover, it would be next to impossible for the LIC and the GIC to operate the time-honoured (obsolete?) procedures for settlement of claims in the absence of documents presumed to be in the custody of the policyholders. In the wake of the disaster on January 26, the Union Finance Ministry is reported to have asked the insurance companies to move fast into the quake-affected areas and start the process of identifying the policyholders and their beneficiaries. Given the enormity of the devastation, the Centre's confidence that when the insurance officials ``go from door-to-door'' in the quake- affected areas, claims can be expeditiously settled (assuming that the relevant documents are available) is indeed naive. The Government's hope that wherever documents are missing, the help of the insurance agent who brokered the policy can be obtained, is equally unrealistic given the massive human casualties inflicted by the quake. It should indeed come as a shameful aspect of the nationalised insurance system in the country that the companies themselves cannot use an internal information system and reach out to the policyholders or their dependents. In October 1999, when a super-cyclone took a heavy toll of lives and property in Orissa, the insurance companies seemed nowhere near the victims of the disaster - owing to a dismal combination of low insurance coverage for the people of the State and the unacceptable inefficiency of the procedures for settlement of claims. To this day, neither in Parliament nor outside, has there been any official pronouncement on the ameliorative role of the LIC or the GIC in Orissa. Will the record be any different in Gujarat?To say that because the poor in India lack purchasing power and therefore they do not come under insurance cover is not the real issue. Even the middle class comprising about 300 million people who have enough financial resources to buy insurance products are largely outside the system of insurance. Overall, hardly ten per cent of the domestic insurance market has been tapped by the LIC and the GIC and yet the opening up of insurance for competition is made out by employee unions as a ``sell-out'' for a new breed of profiteers!

Winds of change

The traditional exclusion of natural calamities from insurable risks, the so-called vis major clause in relation to ``acts of God'', is passe in most parts of the world. The Tariff Advisory Committee of the Insurance Regulatory and Development Authority (IRDA) in India, in its New Fire Tariff that applies to all insurers in India (since May 1, 2000) has included storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation as well as subsidence and landslide including rock slide and earthquake as ``perils'' covered under Standard Policy.

The GIC and the new entrants into general insurance hereafter ought to be able to bring a large number of property-owners aside from business establishments into the protective cover of insurance.

The other constructive new threshold for the benefits of insurance providing succour for people driven to distress in times of natural calamities is likely to be opened up by the Centre's high-power committee on disaster management through its proposal for mandatory insurance of life and property by people residing in disaster-prone areas such as coastal belts, flood- prone areas, sites near nuclear, chemical and hazardous industries and thickly-populated areas.

If the Gujarat experience has thrown up many challenges both for the Government and for the civil society at large, one of these evidently is how to regulate civilian construction activity such that all buildings - residential and commercial - automatically come under property insurance which itself will ensure that property-developers cannot evade the obligation to adhere to minimum safety standards.

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