A working group of the Insurance Regulatory and Development Authority of India (IRDAI) is mulling over simple and affordable insurance cover for individual homeowners and small businessmen living in regions prone to natural calamities.
The insurance regulator is working on this idea in the wake of recent natural catastrophes that caused huge losses of houses and commercial establishments.
The working group has also proposed different products for micro commercial establishments that have a risk value ranging from Rs 5 crore to above Rs 50 crore, the Hindu BusinessLine reported.
The reason why the sum insured for dwellings is inadequate is because of the fact that it is the customers who decide on it, not the insurers. They have no say over the matter.
A lot of times, the customers take insurance for homes on their purchase price. However, "there has to be a system of default sum insured for all the dwellings such that the default sum insured is a reasonable approximation of the correct value of construction of the building," the working group said.
The panel also suggested that homes in multi-storied apartments should be insured for their total saleable price basis ready-reckoner rates released by each state government. Meanwhile, it was further recommended that there should be a validity period of five years for dwelling structure policies, the report said.
The recent floods in Uttarakhand, Chennai and J&K, as well as cyclones such as Phalin, Hudhud and Fani, have revealed that the economic losses far exceed the insured losses. As per the data by the National Disaster Management Authority, the Uttarakhand floods, Cyclone Phalin and Hudhud have caused the economic losses to the tune of Rs 6,600 crore, Rs 3,800 crore and Rs 65,000 crore respectively.
Meanwhile, the IRDAI working group has said that the insured losses for these natural disasters were Rs 3,000 crore, Rs 600 crore and Rs 4,000 crore, respectively. This gap in the estimations is what calls for a re-look at the norms.
Also Read: When Home Cooking Thrives On Tech