Life's Shock Absorbers

India trails behind most countries in terms of overall insurance coverage. Perhaps, it is time to change that, for our own good

- Nachiket Kelkar

In November 2015, heavy rains and massive floods caused extensive damage in Chennai, leading to estimated economic losses of around 14,600 crore. However, insured damage was only about 5,000 crore. Last month, heavy rains and widespread flooding in

Kerala caused economic losses of close to 20,000 crore. Insurance claims, though, may only account for about 1,000 crore. In India, insurance penetration, which is the premium as a percentage of gross domestic product, has been rising over the years. According to this year's economic survey, the penetration was at 3.49 per cent in 2016-17, up from 2.1 per cent in 2001. However, it still lags significantly behind many other countries. According to data from global reinsurance major Swiss Re, insurance penetration in India was at 3.69 per cent in 2017, much lower than the global average of 6.13 per cent. In North America, insurance penetration was at 7.11 per cent, while in Europe and Asia it was at 6.45 and 5.62, respectively. China has an insurance penetration of 4.57 per cent.

Insurance density, which is premium per capita, in India was at $73 in 2017—the world average is $650. In North America, it was $4,120, and in China $384, according to Swiss Re.

"We have noticed that during natural calamities the economic losses in India are much more than the insured losses. This is mainly due to lack of awareness among people about the importance of insurance and their 'nothing will happen to me' attitude," said Sasikumar Adidamu, chief technical officer at Bajaj Allianz General Insurance.

When catastrophes strike, lives are lost, homes are destroyed and many of these people who never saw a need for buying insurance, end up bearing the losses.