India floods: The frequency of such events has set new records of economic stress, the report added. Among natural disasters, India mostly witnesses floods.
Floods have caused widespread devastation across the country, especially in states like Himachal Pradesh and Uttarakhand. The economic loss of the floods is estimated to be in the range of Rs 10,000-15,000 crore, as per SBI’s research report, Ecowrap. The report stated that the heavy toll of these floods, as well as natural disasters such as the recent Biparjoy cyclone, is a matter of grave concern for the country. It added that locational and geographical features make the country vulnerable to a number of natural hazards.
“While the current status of economic loss due to these floods is yet to be estimated, we believe this in the range of Rs 10,000-15,000 crore,” the report mentioned.
India has faced the third-highest number of natural disasters since 1990, next only to the US and China. Including disasters such as landslides, storms, earthquakes, floods, and droughts, India recorded 764 instances of natural disasters since 1900. While from 1900 to 2000, India witnessed 402 events, from 2001-2022, India witnessed 361 events.
The frequency of such events has set new records of economic stress, the report added. Among natural disasters, India mostly witnesses floods. The report added that almost 41 per cent of natural disasters occurred in the form of floods, followed by storms.
The SBI report stated that there is a crucial protection gap in India – the losses that are insured. Of the total $275 billion economic losses globally due to natural disasters in 2022, $125 billion was covered by insurance. “The overall protection gap has increased to $151 billion in 2022, which is much higher than the 10-year average of $130 billion but still at around 54 per cent of the total losses uninsured. Though still large, this is less than the 61 per cent average protection gap of the previous 10 years,” it said,
In India, this protection gap figure stands at 92 per cent. “In effect, In India, an average Indian is insured of roughly 8% of what may be required to protect a family from financial shock following the death of the breadwinner. This means having savings and insurance of just Rs 8 for every Rs 100 needed for protection, leaving a protection gap of Rs 92,” it said.
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The report emphasised on the needs of a ‘disaster pool’ for natural disaster risks involving the insurance sector. “If we consider 2020 floods in India, the total economic loss was of $7.5 billion (Rs 52,500 crore) but insurance cover of only 11 per cent,” it said.
The SBI research report also invoked the COVID-19 pandemic that underscored the need to improve public health and business preparedness. The insurance sector and governments need to discuss potential contingent liabilities, it added.
India needs ‘out-of-the-box solutions’ for natural disasters and awareness across businesses regarding protection gap. “In the MSME sector, only 5 per cent of the units are insured in the country. This sector needs a much higher level of protection,” it added.
It suggested a partnership programme with the government to cover MSME employees and provide social security to them in terms of insurance benefits and income protection for their families.
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