Earthquake Insurance in India

Insurance as a whole is having very low penetration in India. Total insurance premium In India hovers around 0.5 % of the global premium and around 1.5 % of GDP of India. Majority of the population remains uninsured. Penetration of insurance can also be adjudged by the fact that insured losses are a small fraction of total economic losses in the event of catastrophe. The Bhuj Earthquake of Gujarat is one of the greatest Earthquake disasters that India has faced in the last 200 years. An official figure published by the government states a death to ll of 17,122, a figure that has since been reduced to 14,000. However, the number of fatalities is likely to have been much higher. The economic loss is US$ 4.5bn, with insured losses in the range of US$ 100m (Annual Review: Natural Catastrophes 2001, Munich Re). Earthquake risk is inbuilt in many of the Life and Non Life policies. Life policies cover death due to various causes and the risk of earthquake is not excluded. Non-life policies provide for cover against accidental death or injury under various kinds of personal accident policies and hospitalisation benefit for treatment of accidental injury under mediclaim. As far as property insurance is concerned, Householders Insurance providesinsurance coverage to the Building and its Contents. The granted covers include Fire and allied perils including earthquake. The own damage section for two wheelers and four wheelers under motor package policy provides cover against earthquake risk. Other classes of insurance such as Marine, Engineering,Rural and other miscellaneous insurance also cover earthquake risk in some form or the other.

What does the policy against calamities cover?

The policy (Cost: Rs 0.6 per Rs 1,000) insures your house against fire, natural calamities like floods, storms, cyclones and earthquakes, riots, terrorist attacks, gas cylinder explosions. What are covered are loss of the building and its contents. What are not covered are loss or damage to documents, bonds, securities, precious stones, jewellery, cash, valuables.

Who among earthquake victims can claim insurance benefits? For what?

All those individuals who are policy-holders (or their nominees) can claim insurance cover. The earthquake falls within the purview of personal accident insurance policy and fire insurance cover taken by organisations, companies, business establishments, institutions. Individuals may submit that earthquake is a personal accident and claim benefits. It is legal. Only, a token premium needs to be paid. Claims can be made for damages to households and business establishments, loss of belongings, deaths and injuries.

What should be done to fine-tune insurance sector for India-specific situations?

Experts suggest that insurance against fires, earthquakes and other such calamities must be made mandatory for housing establishments, just as in the case of motor insurance, where insurance against risk due to a third party is compulsory. It is being pointed out that developed countries have exclusive property insurance policies tailor-made for specific localities. So a earthquake-prone state like Gujarat ought to have a law that makes property insurance mandatory. This, experts feel, has multiple benefits: survivors of calamities would not have to depend on charity; liability-averse insurance companies would offer housing cover only for good structures; this, in turn, would pressure builders to construct top-quality houses/complexes; priceless data on disaster-prone areas/zones would be created.

TAC Rates for earthquake

BIS Zone	Risk Zone	Rates	Remarks
1	Zone I	1.00%	High Damage Risk Zone
2	Zone II	0.50%	Moderate Damage Risk Zone
3	Zone III	0.20%	Low Damage Risk Zone
4	Zone IV	0.10%	Very Low Damage Risk Zone

Zone-I comprises of entire northeastern India, parts of Jammu and Kashmir, Himachal Pradesh, Uttaranchal, Rann of Kutch in Gujarat, parts of North Bihar and Andaman & Nicobar Islands.
Zone-II covers remaining parts of Jammu & Kashmir and Himachal Pradesh, Union Territory of Delhi, Sikkim, northern parts of Uttar Pradesh, Bihar and West Bengal, parts of Gujarat and small portions of Maharashtra near the west coast and Rajasthan.
Zone-III comprises of Kerala, Goa, Lakshadweep islands, and remaining parts of Uttar Pradesh, Gujarat and West Bengal, parts of Punjab, Rajasthan, Madhya Pradesh, Bihar, Jharkhand, Chhattisgarh, Maharashtra, Orissa, Andhra Pradesh, Tamilnadu and Karnataka.
Zone-IV covers remaining parts of the country.