Kerala introduces comprehensive group insurance to protect homes from disasters

Thiruvananthapuram: The Kerala Cabinet has granted in-principle approval to roll out a comprehensive group insurance scheme aimed at providing financial protection to houses damaged by natural disasters. The scheme will be implemented through the State Insurance Department.

The government observed that recurring natural calamities have been forcing the state to spend substantial amounts on rescue, relief, rehabilitation and reconstruction, thereby affecting fiscal stability. A committee led by Planning Board member Ravi Raman had examined the issue and recommended a Climate Risk Insurance-based risk transfer mechanism, along with a parametric insurance model on the lines of Nagaland. Further studies were conducted under the Rebuild Kerala Initiative.

Acting on these recommendations, the Cabinet approved a comprehensive group insurance framework combining parametric insurance and indemnity insurance for BPL families.

Parametric insurance

• Compensation will be paid to the state if disaster indicators such as rainfall, floods or wind speed cross predefined thresholds in a notified area.
• Individual household damage assessment will not be required.
• Funds will be paid first to the government and used for relief and rehabilitation as per SOP.
• Coverage will be based on the average expenditure incurred by the state on disaster relief over the past decade.
• Insurance period: 5 years
• Premium: 3 percent to 8 percent of total coverage. For example, ₹15 crore to ₹40 crore annually for ₹500 crore coverage.

Indemnity insurance (for BPL families)

• If disaster indicators cross the specified threshold in a notified area, compensation will be paid directly to affected BPL house owners.
• Local bodies will collect data on house condition, area, construction type, age, household assets and family details; the insurer may conduct random verification.
• Covers actual losses including house damage, damage to household articles and rental assistance until repairs are completed.
• Coverage per house: up to ₹10 lakh.
• Compensation will be credited directly to the house owner after insurer survey and government verification (including geo-tagging).
• Premium: ₹250 per house. For 32.3 lakh BPL families, the total premium is ₹80.75 crore annually.
• Beneficiaries: BPL families (extension to other vulnerable groups may be considered).
• In future, mandatory insurance for non-BPL families may be considered by linking it to property registration or building permits.

Estimated financial commitment

• Parametric model: ₹15 crore to ₹40 crore annually
• Indemnity model: ₹80.75 crore annually
• Total annual cost: about ₹120.75 crore

The required funds will be shared in a 1:1 ratio between the state’s Consolidated Fund and the Chief Minister’s Distress Relief Fund. A detailed framework will be prepared in consultation with the Finance Department, Disaster Management Department, Kerala State Disaster Management Authority, Revenue Department and RKI.