Insurance outgo likely to be under Rs 800 cr

Other insurance firms like Oriental Insurance and New India have insured landless labour and marginal farmers under similar government-paid schemes. In addition, there’s the life insurance done by the Life Insurance Corporation and the amounts insured by credit card companies on the cards they have issued — Gujarat has one of the highest number of credit cards, but it is still not clear as to how many of these were in the Bhuj area. Typically, the life insurance on a credit card varies between Rs 1 and 3 lakh.

It is in the insurance of buildings and factories, where the massive destruction took place, however, that there’s virtually no insurance cover, according to top officials in insurance firms. For one, there’s the fact that the insurance habit is still very limited in India — just 0.5 per cent of Indian have any kind of insurance, for instance. So, just a small number of houses in Bhuj are likely to have been insured.

Second, since till recently, the cost of earthquake insurance was quite high, only a small percent of industrial units are insured for this — most policies insure against fire and other such more common hazards. DCM Shriram Consolidated which produces chemicals in Bharuch (which was, by the way, not affected by the quake), for instance, pays Rs 74 lakh a year as fire insurance to its insurance firm — it is only after the earthquake in Bhuj that it has asked the insurance firm to give it the rates for insuring against this as well (earthquake insurance will add another Rs 16 lakh to its annual payout for insurance).

In Gujarat, according to insurance executives, most firms fall into this category — of those that are insured, that is. The big firms, like Reliance, IPCL, Indian Oil, or Essar, however, are covered under a mega policy which includes earthquakes and even potential `loss of profit’ due to disruption of work due to earthquakes, or whatever — none of these, by the way, are badly damaged.

While the total risk cover of these top firms is around Rs 30,000 crore in Gujarat, other smaller industry are insured for around Rs 10,000 crore. Of this, around a fourth is in the Bhuj-Ahmedabad area. Virtually none of this, however, is believed to be covered for the earthquake risk — it must be added though, that insurance firms are still in the process of sorting out individual policies, and these are just preliminary estimates.