Natural calamity insurance: Awareness lacking

By N.Ravi Kumar

CHENNAI, SEPT. 26. Tuesday's earthquake might have been a case of touch and go for the city residents. Yet, the moderate tremors measuring 5.6 on the Richter scale was enough to turn their focus on the need for insuring immovable property against natural calamities.

Though the nationalised insurance companies today reported an increase in enquiries for such risk covers, awareness among the people of the schemes and their significance, however, appears lacking.

Insurance industry officials say, ``people still view insurance as an investment that comes with assured returns. In the process, they forget that covering risks arising out of earthquake is like securing mental peace for a negligible premium''.

While there are no stand-alone policies for earthquake risk cover, the companies insure this as an optional add-on to the householder's fire insurance policy. The premium for the add-on is only ten paise more per thousand rupees of insurance cover a year in Chennai. The premium amount differs depending on the seismic zone under which a centre is classified.

Moreover, as officials at the Loss Prevention Association (LPA) of India point out, ``such policies continue to be sold, instead of being marketed''. In fact, not many are aware that 50 per cent discount is available on the comprehensive householder's policy premium, if its tenure is for ten years. The other option for consumers is an accretion of 10 per cent to the sum insured every year during the policy's tenure.

Popularisation of earthquake insurance cover could have another positive spin-off by way of a heightened vigil on builders. This is under the assumption that the insurance companies, to keep their liabilities at the lowest, would insist on quality construction material and work.

The housing finance companies could also make the difference by making the policy mandatory for property, for which they extend loans. Officials at the LIC Housing Finance say, ``we insist on insuring the property against risks from natural calamities''. The premium cost is either built into the equated monthly installments or the customers are given the option of making an one-time payment.

The best option for the existing residential complexes could be to form an association of owners and get it registered as a cooperative society, which, in turn, could opt for the insurance.

The need for insurance cover against earthquake for immovable property, however, has not gone totally unmissed among the residents, as apartment owners and proprietors of commercial establishments made enquiries. According to a businessman residing in a high-rise apartment in Koyambedu, ``the first thing I did today was to inquire about the insurance cover for losses arising out of earthquake''.

The Tamil Nadu Petroleum Dealers Association, according to its secretary Mr. M. Kannan, has decided to advise its member-petrol bunks to opt for a comprehensive insurance cover including against earthquake, floods and riots.

For those who are yet to make up their mind, it might be a case of better late than never as the insurance companies might hike the premium following the classification of Chennai into the next highest category for seismic activity.

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