Indian Kashmir flood sparks wave of property insurance sales

By Athar Parvaiz

Srinigar, India - Insurance companies in Indian-administered Kashmir, which was hit by a destructive flood last September, have collected substantially higher premiums this year as property owners seek to avoid further financial losses from weather-linked disasters.

Mustafa Kamal, insurance head for Bajaj Allianz which has the region's biggest customer base, said the company had recorded a 50 percent increase in policies by mid-June, and expected to see an even bigger rise by the end of the year.

Ravindra Koul, senior manager with United India Insurance, said its policy numbers had jumped by nearly a third this year as people move to protect their homes and business properties.

"With the spread of awareness about insurance among the educated class, the growth rate in insurance policies all across India is only 10 percent this year, while Kashmir has recorded a 30 percent increase because of last year's disaster," Koul said.

Experts have warned that extreme events like September's floods will occur more often in future due to climate change.

Research published in Scientific American in March predicted that river flooding will worsen in the coming years, with the biggest disruptions expected in Asia - mostly India, followed by Bangladesh and China.

Kashmir's environment department has forecast that the number of rainy days in the Himalayan region could increase by five to 10 days on average in the 2030s, and by more than 15 days in Jammu and Kashmir.

Koul said the 2014 floods had also made people aware of different aspects of property insurance - most importantly getting a correct valuation.

Before, over half of business owners were insuring their property, but many were doing so for less than the market value to get cheaper policies, he added.

"Now people are not opting for poor valuation of their properties to cut down on their premium payment," he explained. "They even pay thousands of rupees for an insurance valuation to get strong liability coverage and are willingly paying heavy premiums."

Altaf Ahmad Lone, who heads the insurance department at Jammu & Kashmir Bank, said people are now asking about how to ensure their assets are fully covered when they take out loans.

Muslim opinion divided

Koul noted that many people are starting to insure their properties even in this Muslim-dominated region where some are reluctant because Islam prohibits mainstream insurance.

People the Thomson Reuters Foundation spoke to at insurance company offices in Srinagar said they knew it was a religious risk, but the devastation caused by the September 2014 floods had forced them to act.

"I can't bear any further loss should another calamity strike," said Imtiyaz Ahmad, a resident of uptown Srinagar whose house was badly damaged in the floods.

Sheikh Showkat, head of the law department at the Central University of Kashmir, said Muslims in some countries like Saudi Arabia, Egypt and Malaysia have the option of the Taqaful system, a form of mutual fund insurance, but there was no scope for this under India's banking laws.

Some Muslim scholars advise against conventional insurance, while others condone it, especially in places like Kashmir where Taqaful is not in place, Showkat noted.

Total losses from last year's floods in Kashmir were declared officially at over 100,000 crore rupees ($15.8 billion). But insurance companies paid claims of only around 1,500 crore Indian rupees ($236 million), reflecting the low level of property insurance in the region.

According to 2014 natural catastrophe data from global risk management firm Munich Re, the floods that hit the Kashmir regions of both India and Pakistan in September caused the highest number of disaster deaths for the year, at 665.

And India suffered two of 2014's three most expensive natural disasters in terms of economic losses.

Munich Re said October's Cyclone Hudhud cost the most at $7 billion, of which only $530 million was insured, and put losses from the Kashmir floods in India and Pakistan at $5.1 billion with $330 million insured.

To change this situation, experts are advising the Indian government to offer tax cuts to citizens who insure their homes.

People have started to take simpler measures to protect themselves too.

"Last year's flood has certainly brought in a panic element," said Syed Abubakar, an insurance consultant in Srinagar.

"In March, a slight increase in the water level in our rivers made people shift their valuables from the ground floor to the upper storeys (of buildings)."

(Reporting by Athar Parvaiz; editing by Megan Rowling)