Insurers appeal NDMA for new building code

Non-life insurers, along with the Insurance Regulatory and Development Authority (Irda), will soon make a representation before the National Disaster Management Authority (NDMA), asking that earthquake-resistant construction codes be made mandatory for availing property insurance against earthquake damage. This was aimed at minimizing potential losses to insurers and re-insurers arising from earthquake damage. On account of the recent 25 April earthquake that wreaked havoc in Nepal while some Indian insurers have an exposure to Nepal’s general insurance market, the General Insurance Corporation of India or GIC Re is the top reinsurer in Nepal, with liabilities of at least $160 million, said Ashok Kumar Roy, CEO of GIC Re. 

Insurers are keen to push local authorities into making it mandatory for builders, engineers and architects to adhere to earthquake-resistant building codes if the residents of such buildings wish to avail home or property insurance cover at the existing low premiums. At present, the premium for a conventional home insurance policy, including a cover against natural and man-made calamities, is as low as Rs.60-80 per Rs.1 lakh. At the prevailing rates, a 2,000 sq. ft house can be insured for Rs.35-70 lakh for an annual premium of Rs.2,000-4,500. If the policyholder buys the cover for 10 years or more at one go, the premium is be even lower as most insurers offer large discounts in such cases.

“The premium for non-earthquake-resistant buildings should be made 10 times the premium for earthquake-proof properties,” he said. If NDMA accepts the insurance industry’s proposals, it may also help lower losses sustained by the centre, which is forced to compensate for damage in the event of a national calamity as the penetration of insurance is low. “The government can’t bear the entire cost of calamities, so the insurance industry has to somehow come to the rescue. We as insurers will accept risks with better terms if buildings are earthquake-resistant.