Why home insurance finds no takers

Estimates suggest the total share of home insurance in the general insurance industry is less than 1%

Home insurance, which covers the house and its contents from fire, theft, burglary and other security concerns, is still a segment that has not seen enough takers. The main reason, according to insurance industry executives, is inadequate tax incentives as well as a lack of awareness.

Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, says people’s perception of risk is low and hence many do not want to take home insurance. He adds that the distribution network of home insurance products is not widespread, resulting in low penetration.

Home insurers also provide cover for household appliances including television, washing machine, refrigerator and jewellery or valuables that are kept in the house. In some cases, even pets in the house, at the time of an accident or robbery and are injured in the incident gets a cover. Terrorism and catastrophic incidents are also covered under some products.

Industry estimates suggest the total share of home insurance in the general insurance industry is less than one per cent. The total premiums collected in the segment annually is also estimated to be less than Rs 30 crore.

Non-life insurance companies have been asking for tax incentives to make home insurance more attractive for customers. The general manager of a state-owned general insurance company said customers have expressed their displeasure on not having any financial incentives for purchasing these products.

“Life insurance as a product is primarily purchased by people in India for tax exemptions. Motor insurance is mandatory and hence people buy the product. But home insurance is neither mandatory nor has tax benefits. Hence, very few people opt for it,” he added.

Several service providers have also tied up with banks to provide the cover as soon as a home loan is taken. This cover would be comprehensive and, apart from the basic cover, would also offer loan protection for the insured if s/he is unable to pay the loan.

Insurers had demanded this cover should be made mandatory for all new homes that are purchased. However, the finance ministry was not too keen on making it mandatory, says the chief distribution officer of a mid-size general insurer.

Due to low interest from customers, the premium rates have also stayed flat. The chief executive of a private general insurance company points out that the premium rates have not moved up, since there have not been high claims reported in the segment. “Apart from some affluent individuals who report claims from time-to-time, the overall claim experience has remained low. Therefore, the rates have been flat.”

Premiums for home insurance for a sum assured of Rs 2 lakh could be as low as Rs 800-900, depending on the items in the house that are covered. Even if perils such as fire, theft and all appliances are covered, the premium does not exceed Rs 10,000 on an average.