A group insurance cover funded jointly by the government and individuals can be used to compensate victims affected by natural or man-made disasters
Both man-made and natural disasters very frequently affect the life of citizens in our country. Global warming and climate change have accelerated the pace with which natural disasters strike different parts of India. Floods caused by very heavy rains have become a common phenomenon during last 10-14 years.
Our country frequently faces man-made disasters such as terror attack, fire in industrial and residential buildings, collapsing of bridges, road and railway accidents etc.
In all such situations either human life is lost or ability of the citizens to carry on normal life is impaired. Sympathy wave follows such incidents and the media makes hue and cry for immediate relief. People with political interest compete to demand compensation for the victims. The government responds by announcing ex-gratia payment to the family of the victims. Usually, the announcements are prompted by political considerations without reference to the ability of the exchequer to dispense the tax payers’ money for such relief. It is high time the authorities devise a scientific Victim Compensation Programme (VCP) which would take care of the victims in letter and spirit and at the same time the treasury is not adversely affected.
The remedy lies in introducing VCP through insurance which is a scientific tool for the purpose. Insurance provides a systematic method of funding VCP without adversely affecting the finances of any organisation responsible to provide relief. If the government doles out relief it does it at the cost of some planned development activities. I fail to understand why the ad hoc method of announcing and providing compensation has not been challenged so far because it is the most unscientific way of managing VCP by the state.
The compensations need to be linked to the magnitude of loss and should not be decided by political or regional considerations. The events should be classified for compensations to be paid by the donors, local bodies, state government, central government and the international aid agencies. But the most ideal scenario would be to provide insurance cover to the citizens for each kind of disaster.
Insurance could be provided on the basis of group cover to the entire population which may be funded by the government or jointly by individuals and the government. For fund raising even a cess on income tax or GST may be thought of. If disaster strikes, people should be compensated as per the pre-determined compensation structure. I do not recommend payment on the basis of quantum of loss assessed by independent surveyors as it will lead to disputes and litigation. If such insurance schemes are managed by the insurers they would pay the compensation out of funds maintained by them on the basis of pre-determined compensation structure.
The government agencies would intervene to ensure timely settlement of such claim. Such an arrangement would eliminate the practice of making announcements for compensations for political considerations. The premium paid to the insurance companies every year would lead to a scientific build-up of funds with the insurers and would not cause a sudden dent to the government treasuries even when the disaster is of very high magnitude involving very large number of people and property. The insurers will never suffer from the problem of shortage of funds because the insurers enjoy protection from reinsurers who are global behemoths.
It is common complain on the part of the victims that the announced compensation has not reached them at all. The scientific arrangement can rule out all such situations which undermine the credibility of the government or highlight the carelessness of our system.
The writer is former MD & CEO, Star Union Dai-ichi Life Insurance