Kerala govt gives in-principle nod to group insurance scheme for disaster relief

Thiruvananthapuram: The Kerala government has given in-principle approval for a comprehensive group insurance scheme to secure financial protection against losses caused by natural disasters. The plan, to be implemented through the State Insurance Department, received cabinet nod on Tuesday.

Repeated natural disasters have forced the state to spend substantial sums on emergency rescue, relief, rehabilitation, and reconstruction, straining its finances. In response, the government had appointed a committee led by Planning Board member Ravi Raman to study a suitable risk-transfer mechanism.

Innovative risk-transfer models proposed

The committee recommended a climate risk insurance model and a parametric insurance system similar to the Nagaland model, with follow-up research conducted under the Rebuild Kerala Initiative.

The government has now approved these proposals, introducing complementary insurance models:

Parametric insurance: rapid relief for the state

Parametric insurance will automatically compensate the state when disaster indicators such as rainfall, floods, or wind speed exceed predetermined thresholds in a specific area. Individual home damages do not need separate evaluation.

The government will receive the payout first and use it for relief and rehabilitation following standard operating procedures (SOPs). Coverage is based on the average decade-long expenditure on natural disaster relief. The insurance term is five years, with an annual premium ranging from 3% to 8% of total coverage. For example, coverage of ₹500 crore would require ₹15–40 crore per year.

Indemnity insurance: direct aid for BPL households

Under indemnity insurance, households below the poverty line (BPL) receive compensation for actual damages when disasters exceed specified thresholds in a specific area. Damage assessments include house structure, floor area, construction type, age, estimated value (valuation), household appliances, and family size. Local self-government bodies collect data, and random inspections may be conducted if the insurance company requires it.

Payments cover house damage, appliances, and rental support until repairs are complete. Coverage per home is up to ₹10 lakh, with proportional premium increases for higher sums. Following survey verification and government confirmation (with photos and geo-tagging), indemnity payouts are made directly to homeowners.

The annual premium for indemnity insurance is ₹80.75 crore, at ₹250 per house covering 32.3 lakh BPL households. Other vulnerable groups may also be considered in the future. Plans are underway to extend compulsory insurance to non-BPL families, linking it to property registration or building permits.

Financials and implementation

The total annual cost of the two schemes is around ₹120.75 crore. Funds will be equally sourced from the state’s consolidated fund and the Chief Minister’s Disaster Relief Fund in a 1:1 ratio. The Finance, Disaster Management, Kerala State Disaster Management Authority, Revenue departments, and related agencies will collaborate to finalise detailed plans.