Millennium Post

Nation must be insured against calamity

With disasters like the Uttarakhand and J&K tragedies alongside cyclone Hudhud battering Andhra Pradesh, the immense loss to life and property has suddenly provided a wake-up call for concerned agencies for providing adequate insurance to the affected in these and other incidents, besides taking precautions for the future in this regard.

Stepping into the groove to meet these needs is Bharat RE which has come out with risk and insurance management services for MSMEs, commercial enterprises & corporate. Bharat RE Insurance Brokers Private Limited (‘Bharat RE’), strategic insurance facilitators, is also in the process of unveiling specialised services and solutions for SMEs.

‘The insurance market is undergoing a lot of change amidst great competition in price level. However, there is a need for every company insurance to include special clauses like dealing with floods in the country and its effects. We also need to define which clauses are good for the insured so that fair and correct benefits reach them,’ said Bharat RE Director Global Strategy & Special Projects T. L. Arunachalam.

He said, ‘Buying insurance today is getting complex and will be more complicated. Many Indian companies will feel the urgency to hire a consultant to identify various aspects of insurance protection against the risks of their business model and these risks include fire, flood, terrorism and natural calamities like earthquake. For instance, many of them may not know that there is a ‘loss of profit insurance’ protection against the unpredictable risks which may lead to business disruptions. There are cases where enterprises, with imperfect insurance protection, when faced with a large accident, were pushed into severe financial stress —even to insolvency.’

‘FDI coming in will see growth in the market and more intermediaries will be good for the market. More foreign insurance brokers coming into the market will be an enabling thing alongside the insurance sector growing and getting better premiums. We are seeing more growth in the SME sector. However, with national catastrophes like the floods in Uttarakhand and Jammu & Kashmir, the uninsured losses are more than insured losses not just nationally but also globally,  which is why we want to increase penetration of related insurance into the sectors that get affected the most.’

Narrating one case in which the vulnerability of the SME is frequently not realised, he said a lamp caused a fire that totally burnt down the goods and business premises worth Rs 20 crore while also causing the death of the proprietor. While the loss was estimated at Rs 11 crore, the man’s family was offered barely Rs 3 crore by the insurance company as the business was inadequately covered.

He said the need of the hour is ‘clearing’ up the insurance business as insurance for SMEs faces various challenges including: bank funding (which is not competitive or having the required insurance product). ‘So our involvement in this insurance sector will see growth in SMEs and all stakeholders as we will be filtering the customers for the insurance companies and also bringing clarity to this business while also avoiding disputes for them. For instance, we have a company which has been in operation for over 100 years and they need professional advice that we can provide. So we will study their operations and put in the relevant clauses for their insurance purposes.’

He said Bharat RE has been creating awareness among the entrepreneurs mainly in small and medium sector about the importance of insurance protection for their business and commercial assets whose value is more important than money deployed towards insurance cover.

‘Risk Management for enterprises using insurance as a tool, is best done by an external specialist organisation such as Bharat RE — which has the pooled skills of experts in insurance, engineering, law and finance, and puts these skills to use almost continuously for a large number of their clients,’ he said. ‘With different wordings, covers, terms and conditions and warranties being offered, it is quite probable that with the changes and reduction in pricing, the insured fail to see the subtle changes in the terms of coverage.

And in the event of a mishap, companies are left defending issues that are clear in your mind, but not reflected in the insurance contract, leading to the compensation being woefully short of expectations. Practically every enterprise, when faced with an accident situation involving a large loss, manages to get compensation from their insurance company to the extent of anywhere between zero and 20 per cent only of their actual loss.

This happens because, either the insurance programme of the enterprise is not properly designed or the management of the claims process is not done effectively,’ Arunachalam added. Highlighting the Uttarakhand tragedy as a case in point, he said no insurance broker reached out to the affected in this regard where even houses were flattened and caused innumerable loss — though, in Jammu&Kashmir, the insurance awareness was greater. However, even in a developed state like Andhra Pradesh, the effects of Cyclone Hudhud included such insurance problems.

A national annual conclave SYNERGY 2014 – organised by the Xavier School of Management (XLRI) recently witnessed participation of eminent industry leaders talking on topics like Future of Finance and The Way Forward for the Indian General Insurance Industry.

Identifying banking sector as the most important for growth, and acknowledging the issues of
regulatory compliance, MCX-SX MD & CEO Saurabh Sarkar said, ‘India is under-banked, but the cities are over-banked. For propelling growth, there is a need to look beyond cities and get money from new areas such as the informal sector or even avenues like Islamic Banking, which is till now uncaptured.’

A panel discussion on Indian Insurance Sector – The way ahead witnessed eminent speakers from the insurance sector. Raheja QBE General Insurance Co. Ltd. CEO and MD Praveen Gupta said, ‘For insurance sector to grow, people need to be more perceptive of risks. Insurance is in its nascent stage and it will pick up. There is a need to move from focussing on delivery than on distribution through agents.’

Tata AIG General Insurance Co. Sr. Vice President Sushant Sarin  opined that the insurance sector is driven by knowledge about a few key areas including the need to recognise customer’s need for financial security; the price customers are willing to pay and the products they are willing to adopt. The growth of this sector hence, is dependent on the bridging of this gap, he noted.
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