Kerala floods: Insurance industry braces for impact

• HDFC
• 29 Aug 2018
• Knowledge Centre

HDFC, Tester

Following a thrust from the Insurance Regulatory and Development Authority of India (IRDAI), a number of public sector insurance companies have accelerated their claim settlement procedure in flood-ravaged Kerala.

 

The insurance regulator has asked insurance companies to have “a suitably simplified process/procedure, including relaxations in the usual requirements wherever feasible.”

 

A substantial number of life insurance and property insurance claims are expected to pour in once the situation improves in Kerala. These are expected to be followed by health insurance claims, owing to waterborne and other diseases, and also claims under the Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Yojana.

 

Insurance companies expect claims to exceed the Rs 1,000 crore mark. In addition to this, banks are expected to float loan restructuring packages, according to a financial daily.

 

Girija Kumar, CMD, Oriental Insurance said,

 

“We have simplified the claim processes in Kerala. We have established various collection centers, and are deploying more people in the state for faster claim settlements. We are expecting a huge claim outgo in motor, household and shopkeepers’ insurance. At the moment, it would be difficult to assess the extent of the damage.”

 

The Life Insurance Corporation of India (LIC) has formed a special team for the speedy settlement of individual life policies and claims under the Pradhan Mantri Jeevan Jyoti Bima Yojana. Similar measures have been taken by other players across the industry.

 

Worsening Situation

 

The industry feels that given the circumstances, claims will be humongous going forward. The daily quoted a spokesperson from United India Insurance as saying,

 

“The second round of floods has been particularly devastating, and we are expecting large claims. Unlike the Chennai floods, all the districts have been impacted in Kerala. The economic loss is going to be huge. We are yet to assess the insured losses. We are trying to settle claims fast. Through advertisements in various media, we are asking people to contact us for the same.”

 

The insurance industry expects the greatest number of claims to come from the motor insurance segment. Following the floods in Chennai in 2015, claims worth Rs 4000 crore were largely those of motor insurance. Crop insurance is expected to come in a close second, with the Agriculture Insurance Company (AIC) expecting claims of ~Rs 15-16 crore.

 

A replay

 

The insurance industry being hit by natural calamities is not a new story. Floods have been the reason for the biggest losses to insurers in over a decade, according to the daily. Insurance claims of over Rs 5,000 crore owing to the Chennai floods in 2015 were the highest for the general insurance industry. In addition to this, the insurance industry was badly impacted by the Mumbai floods in 2005 (Rs 4,000- Rs 5,000 crore), and also the Jammu & Kashmir and Uttarakhand floods (~Rs 2,000 crore each).

 

Yet, given the low insurance penetration in the country, it is the common man who will be the hardest hit. Global reinsurer Swiss Re had pegged the insured loss in the Chennai floods at less than 35% of the total loss. J&K flood insured losses reportedly were a dismal 6.5% of the total. Kerala is expected to be far worse.