The powerful earthquake triggered calls for a disaster insurance system to be set up.
Chinese insurers have faced several major natural disasters this year, including the worst snowstorms in half a century in January and February.
Compounding the problem is that China's disaster industry sector, including earthquake insurance, is still under-developed. It was estimated that just 5 percent of the more than US$20 billion of quake-related damages in Sichuan is covered by insurers. By contrast, about half of the US$120 billion of estimated costs from Hurricane Katrina was insured, according to Bloomberg News.
In most cases, home property insurance and auto insurance do not cover for earthquake damage which is defined as an act of nature. Some insurers include it in a rider contract. For corporate property insurance, firms can also include earthquake coverage in a rider. A rider means having to fork out more money.
Insurers also face reluctance on the part of firms and homeowners to buy earthquake insurance because of the perception that the possibility of an earthquake happening is low. Only large-scale corporations with ample capital are willing to coverage for earthquake insurance.
Industry watchers said more efforts are needed to highlight the role of disaster insurance and to develop the industry in China.
The regulator has already set up a team to study earthquake insurance, said China Insurance News.
Wang He, vice president of insurer PICC, suggested closer cooperation between domestic and overseas insurers on disaster insurance research. Wang also said in a CIN report that domestic insurers should make better use of the international re-insurance mechanism and shift part of the risk to global capital markets.
Wang also suggested the government could play a vital role to build up a disaster protection system.
The quick and positive indemnity response from insurers after the snowstorms strengthened clients' confidence in insurers, Zhang Xi, a China Galaxy Securities Research analyst, said. For instance, project insurance premiums grew 85.8 percent in the first quarter while those for home property insurance rose 42.9 percent.
The sector acted quickly after the earthquake. The regulator launched a disaster emergency response system to ease indemnity claims. Insurers also paid policyholders promptly and asked employees to donate money and blood to the victims.
(
Shanghai Daily May 20, 2008)
