Insurance headache after China quake

Many do not have insurance or face a tangle of red tape

The official death toll has risen to 51,151 with over 288,000 injured. A further 30,000 are reported missing [Xinhua / BBC / CNN]. The biggest problem faced by authorities is the housing of 5 million people made homeless by the earthquake. Authorities have put out an urgent appeal for tents and many countries have offered financial aid. The cost to the economy is massive. Damage and losses to the devastated region have been estimated at $50 billion. The rebuilding of the region has begun including more than 96 historical sites damaged in one area alone. Across the entire province the loss to the tourist industry is expected to exceed $1.4 billion. But the priority is to rebuild houses and local infrastructure. Water mains, gas pipelines, electrical and telecommunications links have been severely disrupted and many roads still remain in a state of disrepair.

Bi Jiyao [Senior Research Fellow at the Institute for International Economic Research NDRC] spoke of the problems facing those whose houses were destroyed and who may face mortgage repayments besides having no house to live in. Speaking on CCTV-9, he said the Bank of China had halted repayments but said this was only temporary. Insurance is not as widespread as in the West and many families may face further difficulties as they struggle to pay for a home that lies in rubble. Even for those with insurance, further problems exist as so called ‘acts of God’ are excluded. Insurance premiums to cover such risks as earthquakes and floods are often not taken up. Part of the reason is cost, says Zhang Hannan, a lecturer at the Central University of Finance and Economics, but also partly due to ignorance that such clauses exist.

According to the Chinese Insurance Regulatory Commission, only 31 million Yuan has been paid to victims by insurance companies with respect to life insurance. Xinhua reported the figure as high as 400 million Yuan. But there are also problems with many insurance companies requesting original insurance documents. Many families are unable to provide the paperwork since they would have been buried in the many collapsed homes.