Insurers gear up to address Uttarakhand flood claims

Four public general insurers to hold meeting today to decide on claims settlement process

Uttarakhand floods that have claimed over 100 lives in the last few days has also got insurance companies preparing for the claim settlement process. Both life and general insurance companies have said that their respective claims team have started gearing up to handle claims and process them in a quicker manner.

Sanjay Datta, Chief -Underwriting and Claims, ICICI Lombard General Insurance said that while the claims have not started pouring in, the industry is trying to procure more information on the nature of losses.

Property insurance, shop and commercial insurance are expected to be big claim areas in the floods. These policies cover owners from the perils of damage to property due to man-made incidents or natural disasters. Insurers said that while the corporate presence in the areas damaged by floods and landslides is low, damages with respect to infrastructure would be on the higher side.

"We have started receiving claims for construction and engineering related segment, in the wake of the landslides. We have an office in Uttarakhand to deal with those claims," said a senior official of a public sector insurance company.

In the wake of the situations, the four public general insurers namely National Insurance Company, New India Assurance, Oriental Insurance and United India Insurance are holding a meeting today to discuss the process of claims verification and settlement. Given the nature of the incident, industry officials said that this meeting to be conducted by Oriental Insurance,  will look into the strategies that need to be adopted for quicker settlement of claims, on the site.

Life insurance claims, said sector experts, will also be generated due to this natural disaster. However, it is estimated that the claims would not be high, considering the fact that the insurance penetration is India is very low. However, life insurance companies are working in full swing to settle the claims.

"The moment the claim is received by us, we will ensure that it is settled in a fair and transparent manner in the quickest time possible. We have begun processes to make sure that claim settlement is not delayed," said a senior official of Life Insurance Corporation of India (LIC).

For settlement of such insurance claims, surveyors and loss assessors are appointed by insurance companies to identify the magnitude of the damage and amount of loss.  This independent surveyor assesses the claim and prepares a report for the insurance companies, to enable them to pay the appropriate claim amount. In case of a death of an individual, officials said that in normal circumstances, claims are payable only after the body is recovered and a death certificate is issued by a certified doctor.

Catastrophe insurance is not mandatory in India. This is an area, that has been discussed by the insurance industry for almost two years. Non-life insurers have recently presented a concept paper to the National Disaster Management Authority (NDMA) highlighting the need for a pool mechanism to deal with losses from catastrophic events. However, insurers say that it will a long time for implementing this system in India.

In India, while there are covers to protect property and life from incidents like fire, floods and earthquake, there is an absence of a 'natural catastrophe cover' to cater to the needs of people. If any such event occurs, both insurers and re-insurers have to make high payouts to cover the losses.

A pool-based concept, which was earlier been mooted by finance ministry was later also backed by the general insurers. If a pool is formed, on the lines of the terrorism-pool in India, the losses would be distributed evenly. The pool would consist of regular premiums being made by the common citizens, with or without additional government funds infused in it.

According to Aon Benfield's Annual Global Climate and Catastrophe Report, there was an estimated economic loss of Rs 1,517.1 crore in 2012 from natural disasters in India, including floods (India and Bangladesh) and Nilam Cyclone (India and Sri Lanka).

A Swiss Re study had said that in 2011, insured losses from global natural catastrophes exceeded $110 billion, which made it the second-highest catastrophe loss year ever for the insurance industry. A recent report from catastrophe modeling firm AIR Worldwide revealed that that there is nearly a 7% probability that the global insurance industry will experience this loss level or greater in any given year.