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Modified 29 April 2015
With the earthquake severely damaging the land and lives in Nepal, the phones at insurance companies have not stopped ringing, and a surge in page views is witnessed. The massive earthquake that devastated Nepal on April 25, killing hundreds of people and turning buildings to rubble has poured a colossal inquiry by people seeking insurance against their properties in India.
The property insurance policies cover two aspects, namely content and structure. Firstly, it offers insurance cover against damage to structure and construction cost, in the event of a natural calamity striking. Secondly, it protects the household belongings.
Tapan Singhel, Managing Director & CEO, Bajaj Allianz General Insurance said, “A surge in home insurance demand is here to stay for only a brief period. We have witnessed a similar surge in the past, during the Uttarakhand floods, Jammu & Kashmir floods, and the Sikkim earthquake.”
Currently, the Indian Insurance sector has limited approach on providing home insurance cover. A policy covers the financial loss incurred to a property and its contents due to artificial or natural calamities, including earthquakes and floods. The home insurance rates vary from 70 paise to Rs 1 per area covered and the frequency of calamity occurrences. Often, banks and housing financing companies protect their investments from such probable fatalities by making home insurance mandatory for borrowers.
The 2011 census stated that India had 33 crore homes, and only 50% of them are permanent in nature (pukka construction). And, the current market survey reports that only 20 Lakh homes are insured, aggregating to 2,500 crore in annual premiums.
According to the industry reports, with average premiums touching the Rs 3 Lakh figure, a huge potential in the home insurance segment lies dormant to be captured. However, insurance companies have not been able to tap into the market due to lack of concrete data to capture demand.
“We are experiencing a rush in enquires, but sales conversion is poor because of lack of data,” said Sanjay Datta, Head of Underwriting, ICICI Lombard General Insurance.
However, it is expected that this trend would soon change, as people will learn from the Nepal tragedy. Industry experts believe that people living in seismic zones must purchase home insurance for protecting their assets.
A standard clause in home loan agreement ensures that the mortgaged property is covered against natural calamities, including floods and earthquakes. If the borrower fails to obtain property insurance cover, the lending institution pays on behalf of the borrower, while debiting the premium to the borrower’s loan account.