Insurance as a key element of future disaster risk reduction strategies

Posted on November 7, 2014  /  1 Comments

Ravaya landslides

Despite the massive goof-up with the situation reports which over-reported the number of casualties from the Koslanda landslide by a factor of eight (300 as against the actual 38), the country has been shaken by the disaster. The Sinhala language weekly, Ravaya, was dominated by it. The article that I contributed, building on the thinking we had done after the tsunami, and what our colleague science journalist Nalaka Gunawardene had contributed stood out in terms of constructive proposals that would help avoid such calamities in the future.

The relevant sections in English are given below:

The foundation is the development of good hazard assessments. Consultants working for the Disaster Management Center have developed these for the coastal areas though they are not public. I had for long believed that the East Coast was the most vulnerable to tidal surges and tsunamis. These studies show that the coastal areas north of Mannar, including the city of Jaffna, are at even greater risk. These studies must be completed for the entire country, kept updated, and made easily accessible to the public.

The practical action we can take now is to ensure that public buildings such as schools or hospitals in the areas with significant risk are built or retrofitted to appropriate standards or relocated. Private buildings, such as houses, have to be dealt with differently since the owners may not be in a position to bear the additional costs.

In an ideal world, all buildings, including private houses, will be insured. If hazard assessments are publicly available, one would expect the insurance premia in high-risk locations will be very high or that insurance will not be provided. If a house cannot be built without insurance or insurance will not be provided unless safety standards are met, this will result in a decentralized procedure that will regulate building in hazardous locations.

That is the ideal world we do not live in. Due to reasons I do not fully understand, but possibly including the government monopoly on insurance for several decades, insurance participation in Sri Lanka has been lower even than in India. Hopefully this is increasing since the industry was de-monopolized and began to engage in extensive marketing.

Even if an insurance-based solution is not immediately implementable, it is possible to come up with a glide path that will move us in that direction.

The rest in English at LBO.LK.

1 Comment

  1. In Europe, in most states, building insurance is mandatory. However, this mainly covers fire hazards and owners often are free (not) to choose additional coverage e.g. against floods or earthquakes (yes, we do have them, though minor). In so choosing, they often can get away with building (too) close to a river and then get hit by a so-called “one-in-a-century” flood. Once that happens, these home-owners often cry for government help … and mostly get it, because campaigning politicians do not want to be seen as “spoil-sports”. This is truly the worst of two worlds: those who for years had lower insurance premiums because they had insufficient coverage now get free grants or subsidies to rebuild their houses while those who paid for flood cover too all these years get nothing, in fact often have to quarrel with their insurance over damage assessment etc. That said, you either regulate a common insurance cover for everyone, anywhere (include flood far away from the river too, no matter: the actuary will calculate the flood portion of the premium to be near zero, so the regulation can stipulate the same cover for every region!) or else you must at least make it clear up front (and then stick to it even during election years!) that the state will NOT reimburse reckless home-owners.