Floods could mean over ~10-bn insurance claims

Flood water has begun receding in Kerala, where at least 360 people have died and over 233,000 have been shifted to around 5,650 relief camps. And, general insurance companies are expected to incur claims adding to at least ~10 billion in the coming weeks, say analysts.

Last week, the Insurance Regulatory and Development Authority of India told all life and general insurance companies to settle claims from Kerala faster than usual. This would mean relaxing some of the documentary requirements needed to prove a claim.

Avinash Singh, lead analyst at SBICAP Securities, told Business Standard: “There will be an impact on the general insurance side but less than what we saw during the Chennai floods (of late 2015). In the case of Chennai, industrialised clusters were the most impacted and a total ~ 500 billion in economic loss led to ~50 bn in insurance claims.”

The chief minister of Kerala has said the extent of damage in the state would be ~200 bn.

Analysts say insurance companies will bear around 5 per cent of the total economic loss. In the case of the floods in Chennai a higher proportion of corporate policies in that market led to large insurance pay-outs, which is not the case in Kerala.

However, insurance policies are commercial financial products. Ability to claim benefits for damaged property, crops or vehicles depends on the penetration of categories of policies. As with other states, Kerala is under-insured.

“Overall, the losses for primary insurers and reinsurers are likely to be low and it is quite possible that the ‘Excess of Loss’ cover won’t be triggered for most primary insurers. Moreover, the four PSU general insurers are likely to shoulder the bulk of the insured losses (attributable to primary insurers), given their high share in the Kerala market,” says a report by SBICAP Securities.

Insurance players this publication spoke to have said they will ensure claims are paid in a timely manner.

“We have deployed our Catastrophic Claims Management Plan (CCMP) with relaxed settlement of claims. Under the plan, we have created two command centers, one at the local office (in Kerala) which is assisted by a command center at the head office for better co-ordination. We also have deployed resources at site from other locations and would be using a web-platform to manage the claims,” said Amitava Gupta, Lead of the Commercial Lines Claims at SBI General Insurance.