The economic research wing of the State Bank of India (SBI) has pitched for a public-private partnership to create a disaster pool to mitigate the risks of rising natural disasters in the country.
Insurance companies, while providing coverage for loss of life and damage to property and vehicles, would benefit from government support to cover the economic loss from natural disasters, reported the newspaper The Telegraph.
“A public-private solution, say a disaster pool, for natural disaster risk involving the insurance sector, could offer many benefits over government crisis loans and grants. If we consider the 2020 floods in India, the total economic loss was $7.5bn (INR525bn) but the insurance loss was only 11%,” said SBI Research in a note.
If the government had insured the risk, the premium for the sum assurance of INR600bn would have only been in the range of INR130bn-150bn.
Floods in recent weeks in North India have severely affected Himachal Pradesh, Uttarakhand, Punjab, Uttar Pradesh, Rajasthan, Jammu and Kashmir and Delhi. While the current status of economic loss due to these floods is yet to be estimated, SBI Research analysts believe this is in the range of INR100bn-140bn.
“In the MSME sector, only 5% of the units are insured. This sector needs a much higher level of protection. The government may launch a partnership programme to cover the MSME employees and provide social security to them in terms of insurance benefits and income protection for their families by way of an insurance scheme,” the SBI Research report said.
