Parametric insurance system emulating Nagaland model
Nature provides humanity with land, water, air, and fruits, but turns into a destructive force in an instant, creating graveyards. Natural disasters such as earthquakes, floods, volcanic eruptions, landslides, storms, and tsunamis have probably eradicated humans more than any wars. India, over the years experienced many natural disasters. Back then, natural disasters shocked people, and it was all news. However, times have changed in a way that floods and landslides have become a new normal in the state, evoking no big surprise. An entire village was swept away in a landslide in Wayanad. Hilly districts and coastal areas in the state have become calamity-prone.
There used to be a saying that it would take another century for a state affected by a flood to witness such a calamity again. These beliefs were taken to the cleaners after floods began recurring in the state in recent years. About 500 people died in the 2018 floods. Damage of Rs 50,000 crores was caused. More than 100 people also died in the 2019 floods. The shock and grief caused by the tragedy that struck the scenic hamlet of Chooralmala in Wayanad is still indelibly etched in Malayali minds. The bodies of about 250 people were found. The bodies of more than 100 could not even be found. More than 500 people were injured.
Despite two years having passed since the tragedy, the people nestled in the hilly terrains of the state still wake up to haunting dreams at night. They carry a premonition of something worse about to happen during the night hours. It may not be wrong either.
Every natural disaster imposes an unbearable burden on the government's exchequer. Countries that are frequently hit by natural disasters resort to insurance schemes to cover their financial losses. Kerala has also finally decided to adopt this method. The cabinet meeting has given in-principle approval to implement a comprehensive group insurance scheme in the state to ensure financial security against damage to settlements due to natural disasters.
The comprehensive insurance scheme is being implemented to avoid the impact of huge expenditure on emergency relief, rehabilitation and reconstruction related to natural disasters on the state's financial security. Based on a study conducted by a committee headed by Planning Board member Ravi Mammen, the committee recommended the implementation of an innovative 'risk transfer mechanism' on the model of 'climate risk insurance' to assume disaster liabilities.
Along with that, the committee had also recommended the introduction of a parametric insurance system on the Nagaland model. The cabinet has approved the implementation of two types of insurance. Parametric insurance provides immediate compensation to the state if disasters occur in a specific area above a predetermined level. A premium of Rs 15-40 crores has to be paid annually for a coverage of Rs 500 crore. Indemnity insurance is only for BPL categories. According to this, a house can get up to Rs 10 lakhs. A premium of Rs 30 crores will have to be paid for this.
The premium amount will increase when other vulnerable groups are included. The government will have to pay a premium of about Rs 130 crores annually. The implementation of the scheme is commendable as it is one of the urgent needs of Kerala.