Flood insurance yet to gain popularity in India
S. Vishwanathan, head - Commercial Lines Underwriting, SBI General Insurance, shares details about the trends in flood insurance business in India:
Dr Ravi Lalwani: India has witnessed floods in different parts of the country. How is the flood insurance business this year compared to the previous years?
S. Vishwanathan: Flooding affects more people worldwide than any other form of natural disaster. Unfortunately, insurance cover for the risk of flooding is not widespread. Over the last few years, flooding has affected various cities, townships and rural parts of India. Flood insurance forms part of the Standard Fire and Special Perils (SFSP) insurance cover in India and the fire portfolio has grown by 20% in FY 18-19, which is also the growth percentage for flood insurance business.
What is the size of the flood insurance business in India? And what is your company’s share in it?
Flood cover is a package of multiple covers like storm, tempest, flood and inundation (nomenclature STFI). Flood insurance is not sold as a standalone cover in India. It is rather offered as a bundled cover under that Standard Fire and Special Perils Insurance (SFSP). Customers are given a choice to opt out of the flood cover. It is, however, seldom exercised by them. Considering this aspect, the general insurance industry fire business (Including STFI Peril) for FY 17-18 is around Rs108 billion and SBIG has contributed roughly Rs8billion (7.4%) to this portfolio.
Please share some details about your flood insurance products.
We offer flood cover through various products such as standard fire, industrial all risks, business packages, SME package – pre-underwritten, simple home package and long-term home package.
What is the profile of the most common retail customers? SME customers?
The profile for retail customers is primarily residential risks and the products sold are simple home package and longterm home product linked to the home loan segment of the bank. The profile also includes SME manufacturing and shop risks, catered by the SFSP and business package products. These products provide flood damage cover to both the structure as well as contents.
From which parts of the country do you get majority of demand for flood insurance?
The Indian states of West Bengal, Orissa, Andhra Pradesh, Kerala, Assam, Bihar, Gujrat, Uttar Pradesh, Haryana and Punjab are flood prone generally. Eastern coast of India, parts of Gangetic basin and parts of the western coast are most prone to flooding. This stands even more true of late as due to rapid real estate development and inadequate drainage systems in major cities, there is a recurrence of flooding incidents almost every year within city / town premises as well.
Which technologies are being used for inspection of flood insurance claims?
Natural calamities such as flood and inundation bring in its wake many insurance claims as such events affect a significant number of people in a geographic territory. Such large scale claims due to a natural disaster are normally treated as catastrophic loss claims with simplified claim procedure and reduced number of documentary evidence for speedy settlement. For this a fast track claim settlement process has been devised wherein instead of physical dispatch of documents for claim processing, the same are scanned and submitted by mail and uploaded on a common drive by the loss assessors and claim handlers.
What are the most common frauds in flood insurance? How do you tackle such frauds?
The necessity for prompt settlement of such claims with a curtailed list of document requirement, as outlined above, at times may lead to fraudulent claimants as customers lodge fictitious claims in the names of those who have not actually suffered any loss in the flood. Sometimes, opportunistic customers also may lodge such claims. However, at our end, we nip such frauds in the bud by ascertaining identity details of every claimant and the genuineness of the claims through professional loss investigators.
What are the major differences between flood insurance in India and abroad?
Non-life insurance penetration in India is only 0.77% of GDP as against global average of 2.82%. Flood cover is optional under property insurances and with such lower penetration levels, there is a glaring problem of inadequate coverage. Hence, in the event of any major disaster, the government must step in to provide financial assistance to affected people (eg - Prime Minister’s Relief Fund). Almost all developed countries have adopted some form of bundled system, where catastrophe risk coverage (including flood) is attached to homeowner’s or fire insurance. Most of the countries abroad also get contributions from disaster relief funds sponsored by the government.