Worried about Earthquakes? Insurance is a Safe Anchor

Earthquake insurance is a must-have! In recent years, India has been hit by several earthquakes across different parts of the country. According to official estimates presented in the Lok Sabha, there were 97 earthquakes in 2022 and 41 earthquakes in the previous two years, namely, 2021 and 2020.

In India, a key reason for frequent earthquakes pertains to proximity of specific cities to seismically active areas of Nepal and the Himalayan region. For those wondering which Indian city is most prone to earthquakes, the geographical positioning closer to high seismic zones pinpoints Guwahati, Srinagar, Delhi, Mumbai and Chennai. In fact, on December 8th, 2023, an earthquake had hit Chengalpattu in cyclone-hit Tamil Nadu.

Is an earthquake covered by insurance?

Typically, this is covered in your home insurance policy. If you do not have one, a closer look at prioritising life and property securing options should include earthquake cover as a top priority. For individuals and organisations, it is understood that their coverage should be comprehensive so as to secure themselves from incurring costs related to extensive damages. 

To start with, understand whether your location is in a high seismic zone. For instance, if you are located in Delhi or Srinagar or Himachal Pradesh, and closer to zones that are frequently prone to earthquakes, you need to prioritise your cover accordingly. Decide if you want to opt for a longer tenure based on your plans to locate or relocate later in the future.

Earthquake Insurance: What To Look For 

To start with, here are a few basic factors to understand:

• Check whether your policy has a section pertaining to natural disasters including earthquakes

• Examine whether you want to combine it with more riders and options

• Pay particular attention to phrases or terminology that refers to ‘Act of God’ and ‘natural disasters’

• Understand what is covered; probe what is not in your policy.

World View: The Link Between Climate Change and Natural Disasters

For insurers, the impact of climate change amidst the focus on natural disasters marks an evolving shift from traditional models. For instance, in New Zealand, an insurer broke new ground by introducing a first-of-its-kind new pricing model based on individual homes’ risk of being prone to floods. The insurer deep-dived into an analysis spanning 50,000 years of continuous simulation of all flood sources including fluvial and pluvial, thereby cataloging around 350,000 simulated flood events.

Across the world, Japan is recognised as one of the most earthquake prone countries and has established itself as a pioneer in disaster mitigation efforts and in implementing stringent measures to address it. However, the same cannot be said when it comes to its insurance penetration. According to a report in Nikki Asia, Japanese companies prefer to hold cash as a contingency plan to tackle natural disasters such as earthquakes. Their business viewpoint is to refrain from putting excessive deposits in earthquake insurance, which could spell lower capital efficiency in terms of shareholder payouts and investments. 

Building Robust Insurance Solutions and Financial resilience

India’s insurance ecosystem has tremendous expertise and experience in innovating and collaborating through InsurTechs to manage risks. It makes perfect sense to consider how futuristically this expertise can be leveraged in the form of solutions that protect people and livelihoods from earthquake-related risks.

The monumental destruction caused by an earthquake cannot be understated. The aftermath of such a catastrophic event results in a barrage of insurance claims, to tackle which insurance companies are adopting new technologies like IoT. Faster and more streamlined processes aided by InsurTech can help victims of earthquakes rebuild their disaster-struck lives.

In an earthquake, the risk to life and property is huge. While many builders and property developers in India are stepping up with measures to address this at a structural level, insurance cover can provide the financial resilience that can otherwise hit Indian households badly. Reducing insurance risk and vulnerability of buildings and structures is critical for individuals, businesses and organisations.

The need of the hour is for insurers and insurance providers to step up and make optimal use of data-driven decisions to shield policyholders and educate people about the need to ensure they opt for earthquake insurance to build financial resilience.