A hike in premium may be on anvil for insured properties rebuilt after a disaster

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The Insurance Regulatory and Development Authority of India (IRDAI) has proposed introducing a differential charge for insured properties that are rebuilt on disaster-struck area. According to a report in the Times of India, S N Rajeswari, a member of IRDAI, highlighted the growing risk of climate change and natural disaster for the Indian insurance business, citing a report that claimed India was the seventh-most vulnerable country to climate change disasters.

“Every year, once-in-a-century storms strike. All of the reinsurance or insurance premium charging models are under jeopardy. It will be tough to come up with a universal paradigm because the situation differs from country to country,” the news report quoted Rajeswari as saying.

Insurance Change

However, as weather dangers increased, so did the density of construction in high-risk areas. “Property is being built on more susceptible lowlands and near coastal areas. While early warning systems have improved and persons may relocate, dwellings must be rebuilt. For the government, this is a no win-win situation,” she said.

She claimed that even huge corporate firms were unaware of the problem. “There is a requirement for education. After compensation is given, even industries are constructed in the same location. Do we mean to indicate that they are unaware of the situation?” the report quoted Rajeswari as saying. “We should probably demand that they pay a higher premium because this is a national loss,” she said.

Insurance, according to Rajeswari, raised risk awareness in addition to giving protection. She cited a Lloyds study that found that increasing insurance coverage by 1% can cut the worldwide cost of climate disasters by 22%.