By Mr. Praveen
Chhajed, Bajaj Allianz General Insurance
In the past 60 years,
India’s general insurance market has grown to Rs. 70,000 crore.
Simultaneously, the penetration of common retail insurance products for health
& motor vehicles has been wide spread in the past ten years.
Home protection
However, home
protection has not grown versus other retail products, despite the fact that a
huge potential for home insurance is available in the market (a rough estimate
shows it to be about Rs. 5,000 Crs.).
A report by the
Federation of Indian Chambers of Commerce and Industries (FICCI) on the general
insurance industry reiterates the point by stating that the penetration of home
insurance in India is less 1 per cent.
A close look &
analysis of the scenario suggests that the two prime issues are lack of
awareness for home insurance along with no ease of buying such products despite
the availability.
In our country India,
awareness regarding home insurance is negligible when compared to other
countries. Most people are not aware about ways to secure their home against
unexpected eventualities.
If something happens
to their dream home, they invariably find themselves at a loss. Therefore,
there is a need to make the customer understand the importance of a home
insurance policy and the benefits that it comes with it.
What does a home
insurance policy cover..?
There are various
home insurance policies available in the market that cover major risks
associated with house & its contents against perils such as fire, theft,
burglaries, floods, earthquakes & other natural calamities. Under these
plans, the structure and / or contents such as jewelry, electronic and portable
items, furniture & fragile items etc.,.. are covered.
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| Mr. Praveen Chhajed, Bajaj Allianz General Insurance |
The various perils
under the policy not only include natural calamities, but also risks like
bursting of pipes, riots, and malicious damage.
Further, there is
also an option to insure your home against terrorism by paying an additional
premium. What one often does not know is that it covers losses on account of
third party liability as well.
A significant aspect
that every home insurance policy buyer should keep in mind is how the sum
insured for their property is determined & its implications in case of a
claim.
Nowy, a majority of
the home insurance policies available in the market provide the option of
insuring your home i.e., the structure, at either reinstatement value or /
indemnity value.
In case your home has
been insured on the reinstatement value, what will be accounted for is the cost
of construction only. To be precise, the cost that will be incurred to
re-construct the house (labor & material cost).
On the other hand, if
the house is insured on its indemnity value, the amount paid will be the
reinstatement value less depreciation which is based on the age of the
property.
Besides a lack of
understanding, popularity of home insurance products has also suffered from
complex procedures and documentation, whether it is at the policy issuance
stage or / at the claims stage. A
procedure that allows the customer to deal with a simple product without
additional efforts is therefore important.
A survey to
understand the current market requirement when it comes to a suitable cover for
home owners showed that the need of the hour is an easy-to-understand and
innovative comprehensive all risk home insurance policy that will not only
cover all possible risks, but also ensure ease of transaction.
The present need is
for a cover that will take into account growing inflation, whether it is the
property prices or cost of consumer durables, which are some of the prime
elements that a home constitutes of.
Some of innovative
covers available in the market include..!
* * An option to
cover the property on an agreed value basis.
Typically, a home is
covered on either its indemnity value or / the cost of construction. However,
customers today are looking at policies that promise a cover for their house at
its sale price. In an agreed value policy the customer will have the option of
insuring the property as per the rate mentioned on the sale deed, as on the
date of proposal.
This will be helpful
especially in case of a total loss where the insured will get an amount that
will take care of both construction and land costs, making it a worthwhile
option for owners of flats and apartments.
* *New for old.
Unlike the existing
basis of settlement for contents which indemnifies the insured after
considering the cost of wear and tear, a feature like new for old for contents
upto the age of 5 years will be more welcome.
The benefit of such a
feature is that it will provide the insured with the option of not getting
affected by depreciation charged on normal policies.
* * Rent for
alternate accommodation.
In case of an
unforeseen event that makes the home inhabitable, one would need to move to a
rented accommodation.
An in-built cover
that could take care of the expenses incurred towards additional cost for rent
could be immensely beneficial, so as to reduce the financial burden for a
person.
** Ease of use.
A hassle-free
long-term cover coupled with minimal documentation, especially since consumers
are living life in the fast lane and saving time is always essential.
Large amounts of
documentation can be a deterrent to many, leading them to the decision of not
availing of essential services. What customers want today is a policy that is
easy to understand & gives them ease of transaction.
For instance, a
distinctive feature of our policy is that we do not require a list for contents
whose sum insured is above Rs. 5 lacs.
If all these things
are done, individuals spending exorbitant amounts of money on building their
homes would be encouraged to safeguard their investments by taking out a home
insurance policy tailored to their requirements.
The author Mr. Praveen Chhajed is vice-president and
head of non-motor claims at Bajaj Allianz General Insurance.
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