With natural disasters frequently hitting the country, the NDA government s Budget is expected to announce some tax benefits for insurance policies covering natural disaster so that people can be encouraged to buy these policies.
Sources said the Ministry of Finance has held extensive discussion on the issue with the insurance industry as part of pre Budget discussions. The tax benefit can be on the lines of retail health insurance policies which offer tax benefits to the policy holders which has made the segment as one of fastest growing segments in the country, said an official. By offering tax benefits, the government can encourage people to buy insurance policies against natural disasters like floods, cyclone and earthquakes where losses can be recovered from the insurance and reinsurance companies, he said.
Currently, the central government and the state governments are compensating for the huge losses to the extent it can, creating deep holes in public finance.
Also in the absence of an insurance mechanism, the huge gap between economic losses and insured losses has been affecting both common man and economy of the country. We have seen in the initiatives of central government like Prime Minister Fasal Bima Yojana (PMFBY), Ayushaman Bharat, Prime Minister Jan Dhan Yojana (PMJDY), insurance is being used as a social security and social empowerment tool to reduce the financial burden for the government through effective risk transfer solutions. A similar measure as part of country s strategy towards disaster management can bring about enormous benefits to the citizens and the government, sources said.
The country has seen many natural disasters in recent times like Chennai Floods, Kerala Floods and Orissa Cyclone – Fani. In fact, after being hit by massive floods that led to over Rs 25,000 crore of economic losses, the Kerala government had invited state owned GIC Re and the second largest global reinsurer Swiss Re to suggest insurance solutions as part of disaster management.
This trend is irreversible and instances like many high-rise fires in the recent past in Mumbai and other parts of India, give grim reminder of potential catastrophic consequences for the government and society at a large. Such consequences have the potential to put enormous stress on the financial resources of many state governments that are already over burdened.
In India, most of the losses suffered in natural disasters are not insured, for reasons such as lack of purchasing power, lack of interest in insurance and ignorance of availability of such covers. Quite a numbers of insurance companies including joint ventures with foreign insurers are providing catastrophic covers implying that the commercial and private sector can also play an essential role in disaster mitigation with the right incentives, sources said.
The proposal for an insurance catastrophe pool (INCIP) which would have mitigated the sufferings proposed some years ago was stuck with the government with no decision taken about charging of premium and the complex issue of implementing the scheme across the country.