The World Bank, the Global Facility for Disaster Reduction and Recovery(GFDRR), together with partners, are developing insurance solutions and providing finance to help vulnerable countries proactively manage disaster risks through a portfolio of financial instruments. The World Bank Group’s Global Index Insurance Facility provides catastrophic risk transfer solutions and index-based insurance to small farmers, micro-entrepreneurs and microfinance institutions in developing countries. The International Finance Corporation is also active in this space. Accelerating this global effort, Germany, the UK, the World Bank and GFDRR, over 30 NGOs and private sector partners have launched a new Global Partnership called InsuResilience aimed at upscaling climate risk finance and insurance solutions in developing countries.
Insurance Coverage: Status
In India, most of the insurers offer cover for natural calamities under different policies which are meant for specific objects of insurance. By and large, the standard Policy for Fire and Natural Perils- issued under Fire Insurance- cover natural calamities and specifies their nature. There are policies derived from these basic wordings such as Industrial All Risk Cover. In many other policies (e.g., Marine Insurance and All Risk Insurance), natural calamities are mentioned as specific perils covered.
Further, so far as natural calamities are concerned, the catastrophic losses occurring out of severity of natural perils are not specifically covered under any policy as such but at the time of Reinsurance, this issue is considered for pricing.
Against India’s disaster history,its geophysical position and the vigorously changing climatic conditions across the globe, the country cannot afford to take natural disasters lightly. Sustainable development must consider investing in disaster risk reductions, ex ante as well asex post, in cost-effective manner.It is heartening to note that Odisha has been at the forefront of implementing globally-acclaimed systems in this respect.
Low insurance penetration in India must be alleviated primarily by motivating the people not to become fatalistic and increasing theirawareness and insurance literacy through various means. Insurers must be prodded by the Insurance Regulatory and Development Authority of India (IRDAI) to market low-premium products and in rural areas, which are always worst-hit, and settle the claims lodged swiftly and appropriately. Crop insurance schemes – government-sponsored or otherwise – are yet to stabilize in many respects. Increasingper capita income would act as a catalyst for the people to consider insurance as a risk-mitigating product to invest in. Excessive dependence on the government and charitable organizations needs to be discouraged through appropriate mix of incentives and disincentives.
All these would necessitate concerted efforts by all stakeholders including, principally, the government, IRDAI, insurers, scientists, technologists and public.
About the Author:
Dr. Manas R. Das is a former senior economist of State Bank of India. He has over 30 years of experience as an economist in two large commercial banks. Academically, he is a gold medalist in Bachelor of Arts with Economics Honours from Utkal University, followed by Master’s in Economics from Delhi School of Economics and Doctorate in Economics from Gokhale Institute of Politics and Economics. He is also a Certified Associate of the Indian Institute of Bankers. He has won several awards, besides being a prolific writer.