Seventy-five percent insurance claim remains unpaid in cyclone Amphan, despite it creating Indian payment record for natural disasters

Cyclone Amphan, the first super cyclone in Bay of Bengal that flattened Sundarban in May 2021, has led to realisation of record amounts of insurance claims in India for any natural disaster despite not paying about three-fourth of the total claimed amount; showed a recently released report by the insurance regulator in the country.

Experts point out that despite record insurance claim realisations related to Amphan, India has the lowest rate of insurance penetration across Asia; as the country’s insurance companies are among the worst performers in the world when it comes to covering climate linked losses.

The report prepared by Insurance Regulatory and Development Authority of India (IRDAI) shows that during 2020-21, 14575 insurance claims were made on Amphan damages amounting to a gross value of 1767 crores rupees; out of which 11512 claims were settled till June 30, 2021 amounting to 471 crores; highest payment to any natural disaster in the country but hardly 30 per cent of the claimed amount.

“Record insurance payment despite not paying about three-fourth of the claimed amount underline the enormity of damages” pointed out a senior official of state disaster management department to The Plurals on Wednesday.

During 2021, Telangana flood with 330 crores claim – out of which 151 crores was realised – and Nisarga cyclone, which had hit Maharashtra in June, 2021, with 290 crores claim value– 93 crores were realised – were next in the list after Amphan.

“In 2020-21, the maximum numbers of insurance claims out of the total in India were due to damages caused by Cyclone Amphan, which caused immense damage in eastern India including West Bengal,” said AartiKhosla, director of non profit Climate Trends.

Khosla claimed that despite the high insurance claim realisations related to Amphan, in general “India has the lowest rate of insurance penetration across Asia”, when it comes to cover climate linked losses.

A recent report prepared by environmental platform Climate Trends based on an Ernst & Young review of climate disclosures from the global insurance industries across the world, has pointed out that Indian insurance companies were “among the worst performers … scoring below 10% for the quality of their disclosures”.

“Indian insurers have been laggards when it comes to incorporating climate risk assessment in their investment and underwriting decision-making process … Insurance Regulatory and Development Authority of India (IRDAI) needs to bring in sensible regulations” said an insider in the climate insurance sector; not wanting to be named.

“The Amphan data shows that while about 80 per cent of the claims were settled, only about 26 per cent of total claimed money was paid; indicating major claims have remained unsettled” point out the insurance expert.

The insurance payment trend seems to be similar for other weather events in the country as well. “Flood risk in India is quite pronounced but insurance companies bore less than 10 percent of the actual losses during the Kerala floods in 2018” pointed out Saon Roy, a visiting professor in Indian Council for Research on International Economic Research.

As a matter of fact, during 2020- 21, out of total 2559 crores rupees claims made under various catastrophes in the country; about 70 per cent remained unpaid.

“Research predicts that climate change could reduce India’s GDP by around 2.6 per cent by 2100, even if the global temperature increase is held below 2°C”, warned the Climate Trends report.

A 2021 Germanwatch report on global climate risk showed that during 2001-19, on a cumulative scale, India was globally second in terms of loss in GDP – expressed in percentage – due to climate change.

“IPCC’s latest report calls for a pronounced focus on stepping up climate risk insurance, given the risks are set to breach all thresholds. CEEW research has found that more than 80 per cent of Indians live in districts vulnerable to climate risk “, said AbinashMohanty, programme lead, Council on Energy, Environment and Water (CEEW).

Financial loss from recent Sundarban cyclones*

Year – Name of cyclone – Financial loss (in Rs)

2019 – Bulbul – 23,811.06 crores

2020 – Amphan – 1, 02,442 crores

2021 – Yaas – 4,522 crores

*Source: Government of West Bengal