January 30, 2001


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The Aftermath: An insurance ready reckoner
The Aftermath: An insurance ready reckoner

    The Rediff Special/ Y Siva Sankar

    As the dust settles on the mountain ranges of torn-down concrete and mangled metal in earthquake-hit Gujarat, the focus is shifting to rescue operations, relief measures and rehabilitation. Settlement of insurance claims is being seen as one of the many issues that deserves top priority.

    The Life Insurance Corporation of India, the pre-eminent player in the insurance industry, has declared it will settle claims on death certificates given by insurance agents, though the usual practice is to accept only certificates issued by municipal authorities.

    However, it is feared that in the Gujarat earthquake, whole families may have lost their lives, and this may include policy-holders and their agents -- a situation hardly helpful for survivors/nominees. compiles a ready-reckoner on insurance from media reports. New layers of information would be added to the ready-reckoner as and when insurance-related developments occur.

    Please feel free, dear reader, to contribute to this compilation.

    Okay, quick, give us some important insurance-related telephone numbers.

    Sure. Ahmedabad = 0091+79+5508337. Bhavnagar = 0091+278+421961. Surat = 0091+261+423033. We hope to offer more telephone numbers in future.

    In the context of the Gujarat earthquake, how is the insurance scenario in India?

    Pretty dismal, actually. India's population is one billion; only 0.5 per cent of them have any kind of insurance.

    Earthquake insurance cover is available in India. So is home insurance. Unfortunately, not many individuals take these policies; it is business establishments, industries, etc, who generally seek cover against earthquakes. This is so because quake cover was expensive till recently. Usually, even small business units used to go in for cover against only common hazards like fires.

    The Indian government feels property worth Rs 100 billion upwards has been destroyed in Gujarat, much of it uninsured.

    In India, residential complexes/dwellings/houses are rarely insured against calamities like earthquakes. Although insurance penetration level in Gujarat is considered high, it is not yet clear how many houses -- thousands of them have been flattened in this disaster -- are insured against earthquakes.

    In the context of insurance, what happens in the aftermath of natural calamities like the Republic Day earthquake?

    When houses, workplaces, shops are laid to waste in seconds, it is virtually impossible to find insurance documents of victims (read policy-holders), more so when even clearing the rubble to rescue survivors is proving a task beyond everyone.

    So the survivors are left with no other alternative but to turn to the insurers themselves for details.

    Thanks to the recent computerisation drives of insurance companies, it just may be possible to retrieve a large amount of data. We believe divisional offices maintain computerised data of hundreds of branches. So, even if branch buildings in the seismic zone are affected, detailed information can still be retrieved.

    If the relatives/family members can establish their identity and bona fides, it may just make things that much easier for insurance companies to settle claims.

    In the age of the Internet, some of the places to search for information may be Web-based e-mails. Maybe the victims had mentioned their insurance policies, in whatever context, to their loved ones at some point in time? Perhaps you -- a family member, relative, friend, official -- did not delete that e-mail and can still access it? Think! You might just remember.

    It is unlikely that people reveal their passwords for their e-mail accounts to their family members, friends, secretaries, subordinates, higher-ups. However, it is not entirely ruled out. It is all a matter of faith and trust, you know.

    We know of several computer-challenged people -- and this list includes chairmen and other top executives of many blue-chip companies -- who depend on others to send/receive e-mails.

    The Gujarat earthquake flattened a lot of places where people may not have heard of the Internet and e-mails. All the same, it has taken a heavy toll of people in cities and towns as well. So cyberspace can be ignored only at a cost.

    Likewise, if you happen to be outside Gujarat, and, God forbid, if someone dear to you is among the victims, you would do well to remember if a fax copy/a personal letter/whatever, containing useful insurance information, is lying in your office table drawer or your bag/briefcase.

    What happens usually in the aftermath of natural disasters is that survivors/inheritors, overcome with grief and shock, find it difficult to harness their memory, little realising that those seemingly trivial pieces of paper and bland e-mails can go a long way in securing a safe future.

    What should survivors and their relatives do to get their insurance claims processed at the earliest?

    The LIC has already relaxed procedures for the production of death certificates for settling claims. It has decided to accept certificates endorsed by responsible citizens, including insurance agents. The usual practice is to accept only certificates issued by municipal authorities.

    So, please get in touch with the victim's agent, if you know his/her whereabouts, e-mail ID, etc. Or send an e-mail to the insurance company offering all the relevant information. Most insurance companies have their own Web sites through which you can contact them. Check the hyperlinks at the bottom of this feature.

    If the cause of damage is a flood or earthquake, you may have to prove that the natural calamity did occur. Newspaper articles and photographs or even a report from the meteorological department would help. In such an instance, a trip by the surveyor to your home to see the damage may also suffice. But these rigid rules are being sought to be relaxed in Gujarat.

    Where the entire family is dead, and if there are more than one claimant, the case will be settled by a court of law.

    What does the policy against calamities cover?

    The policy (Cost: Rs 0.6 per Rs 1,000) insures your house against fire, natural calamities like floods, storms, cyclones and earthquakes, riots, terrorist attacks, gas cylinder explosions.

    What are covered are loss of the building and its contents. What are not covered are loss or damage to documents, bonds, securities, precious stones, jewellery, cash, valuables.

    What are the insurance companies doing to help the survivors/nominees/inheritors and quake-victims?

    The four public sector non-life insurance companies have formed an association called General Insurers (Public Sector) Association, or GIPSA. This agency is planning to coordinate quake-related work so that claim settlements can be expedited.

    The LIC has decided to waive the penal interest for the next three months if the policy-holder does not pay the premium in time.

    Duplicate certificates of a policy will be issued free of cost in case the originals are lost.

    Teams of officials from insurance companies will visit the affected areas to find out how best to reach the people in need.

    Only fifty per cent interest would be charged while reviving policies that have lapsed due to policy-holders (the affected who have survived the earthquake) not paying premium in time.

    The insurance companies are setting up special cells in places like Ahmedabad and Rajkot to expedite settlements.

    How many claims do insurance companies expect?

    Apparently, some 3,000 non-life claims from earthquake victims have already been lodged. Overall, the insurance companies may end up settling claims worth Rs 10 billion, including Rs 3-4 billion on claims related to deaths.

    The Kandla port alone is expected to claim Rs 3 billion separately. In December 2000, for the Bhuj-Ahmedabad area, National Insurance Company offered a district insurance cover as part of the Janata Personal Accident Policy. So Rs 15,000 each would be paid to families whose members have died. District authorities pay the premium of Rs 10 per year person.

    Oriental Insurance and New India Assurance have offer similar, government-paid cover for landless labourers and marginal farmers.

    State-owned insurers offer cover for schemes of public sector banks for Rural India. These loans are offered to farmers and villagers to buy livestock, etc. The insurers may have to look at claims related to 8 million marginal farmers, 7.5 mllion landless labourers and 16 million people below the poverty line in Gujarat.

    Who among earthquake victims can claim insurance benefits? For what?

    All those individuals who are policy-holders (or their nominees) can claim insurance cover. The earthquake falls within the purview of personal accident insurance policy and fire insurance cover taken by organisations, companies, business establishments, institutions.

    Individuals may submit that earthquake is a personal accident and claim benefits. It is legal. Only, a token premium needs to be paid.

    Claims can be made for damages to households and business establishments, loss of belongings, deaths and injuries.

    Is there any way people who have not insured anything, can benefit from the largesse of insurance companies?

    No. Unfortunately, insurance companies in India are not rich with disposable cash. They do not maintain any relief funds. Settlement of claims will be viewed purely as business transactions. It is like honouring a legal, binding agreement or commitment or obligation.

    How do insurance companies behave during settlements of claims?

    On a one-to-one basis, officials may be most sympathetic and courteous. However, since they have a job to do, which is honouring a business agreement, insurance companies can be very business-like, whatever be the situation.

    Take a look at this extract, culled from the Internet. You will understand how they operate:

    'Oriental Insurance Co. Ltd -- Incorrect Application Of Tariff.

    'As per the written description in Tariff, parts of State of Bihar and West Bengal, lying north of the Railway line starting from Dildarnagar and passing through Patna, Kiul, Bhagalpur, Sakrigali and Pakaur Railway Station, fall under Earthquake Zone I. Siliguri is north of this Railway line and falls in Zone I.

    'A customer there was charged at rates applicable in Zone III for earthquake risk cover.

    'Application of incorrect tariff rate resulted in less collection of premium by Rs 382,671 during the period from January 30, 1986 to February 28, 1990 for the earthquake cover.

    'The Management stated (August, 1991) that there was a difference between the written descriptions and the earthquake map about the Zone in which Siliguri falls and the Company treated Siliguri as falling in Zone III.

    'This reply of the Management is surprising as tariff does not require investigation into geological maps at the field level and any geological ambiguity sought to be introduced at field level, would only hurt Company's revenue and can never increase it.

    'Also Calcutta Regional Office of the Company had asked (16th April, 1986) the division concerned to charge earthquake premium in Siliguri as per rates fixed for Zone I.

    'Incorrect application of tariff resulted in a loss of revenue of Rs 383,000.'

    So there: They are as much concerned about helping the quake-hit as they are about reconciling their accounts. Make no mistake.

    What should be done to fine-tune insurance sector for India-specific situations?

    Experts suggest that insurance against fires, earthquakes and other such calamities must be made mandatory for housing establishments, just as in the case of motor insurance, where insurance against risk due to a third party is compulsory.

    It is being pointed out that developed countries have exclusive property insurance policies tailor-made for specific localities. So a earthquake-prone state like Gujarat ought to have a law that makes property insurance mandatory.

    This, experts feel, has multiple benefits: survivors of calamities would not have to depend on charity; liability-averse insurance companies would offer housing cover only for good structures; this, in turn, would pressure builders to construct top-quality houses/complexes; priceless data on disaster-prone areas/zones would be created.

    Is it true that credit-card holders, mutual fund unit-holders, bond-buyers and housing loanees among the quake-hit may benefit even though they may not have insurance policies of their own?

    Yes. The quake-hit and their relatives/nominees may not even be aware of this!

    In the late '90s, several financial service companies in India had offered add-on personal accident insurance to their customers (buyers of credit-cards, mutual funds, bonds, housing loans). Later on, market regulator SEBI banned this add-on benefit activity. Logic suggests that those who got these personal accident covers in the old regime or their nominees, would be eligible for benefits now.

    However, a definitive statement on this has yet to be made by companies. For there is confusion over whether death due to earthquake can be treated as a personal accident. Usually, road and air mishaps are treated as personal accidents in the context of insurance.

    These add-on covers were offered in the first place to customers because policies, when bought in bulk, come very cheap -- almost for 60 per cent less. So financial services companies offered them as a bonus, to lure potential customers.

    Since these are group policies, claims would be an easy process -- the quake-hit or their relatives merely need to prove that they are/were members of the group cover scheme.

    However, in the quake aftermath, credit-card issuers, mutual funds and others who had paid the premia on behalf of their patrons, are yet to play a proactive role.

    Some of the operators who had offered add-on benefits: Bank of Baroda's BoBCards Division, JM Mutual Fund, IDBI Mutual Fund, BoB Mutual Fund, Jardine Fleming Mutual Fund, Grindlays, SBI Cards and Citibank. This is not an exhaustive list.


    'LIC agents will help settle claims of the quake-hit'
    The Rediff Guide to Home Insurance
    Life Insurance Corporation
    United India Insurance
    New India Assurance
    National Insurance
    Oriental Insurance
    General Insurance Corporation (Reinsurer)
    Is the insurance amount received taxable as capital gains? Web site about insurance industry in India Online directory on Indian insurance Insurance on the Net

    Design: Lynette Menezes

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