No cover for city buildings

Lack of awareness among home owners and lack of enthusiasm among agents for home insurance, leave most buildings in the city unprotected

Despite annual floods, building collapses and terror attacks, Mumbaikars rarely go in for house-hold insurance.

Companies say insurance against fire is the only cover that is popular. At the most, flat owners may seek coverage against burglary, but insuring a building is rare even though its benefits can be substantial.

An exception that proves the rule is the 65-year-old building of the Southlands Cooperative Housing Society in Colaba. This is one of the most expensive and well-maintained buildings of the area, and it has been covered by household insurance for the past 50 years.

Members of the Southlands managing committee say they have been adding various forms of cover from time to time over the years. For instance, after the Bhuj earthquake in 2001, the society went in for earthquake coverage, and after the Mumbai deluge in 2005, it added protection against floods.

One of the corollary benefits of insurance is that the building has been maintained in the best possible condition, despite its age.

“The building commands a certain price due to its maintenance, security, water supply, sanitation and cleanliness. We do regular anti-erosion, water-proofing, and other treatment to stay eligible for the insurance cover, since we are right next to the sea,” explains Rooprani Parikh, secretary of the Southlands society.

By contrast, Gomant Kripa, a two-wing residential society building where members of A wing have registered themselves as a separate cooperative housing society. They are in talks with insurance companies for coverage but are finding it difficult on account of their differences with the residents of the other wing, B wing. They allege that the B wing residents have undertaken major structural changes which are illegal and may put the whole building at risk.  “We have completed all repairs and done the full maintenance of our wing. But the problem is that our adjoining B wing has made several structural changes,” says Vijay Vengsarkar, secretary of the Gomant Kripa society.

The Gomant Kripa problem typifies one of the most common reasons why insurance coverage for buildings is rare in Mumbai.

“Buildings are usually owned by societies and not individuals. The societies are not insuring the buildings because there is no agreement among their members,” says Harsh Roongta, CEO of Apnaloan.com.

Many home owners, despite the disasters happening around them, feel it may not happen to them and prefer not to spend anything extra on insurance. “Typically, in India, insurance coverage is given with a home loan, but it expires with the completion of the loan period. Then it is not renewed,” says Kartik Jain, head of marketing at ICICI Lombard.

The problem with the insurance cover that comes as a part of a home loan is that it would typically be confined to a particular flat, and not the whole building.

So, if a structural problem causes the building to collapse, as in Borivli recently, a home owner would not get any benefits even if the individual apartment is insured, unless the society has also taken insurance coverage for the building and met all the requirements that come with such coverage.

Some experts blame insurance companies for a lack of awareness about household coverage. “Agents are busy chasing consumers for life insurance. They don’t push for household insurance,” says Vinayak Kulkarni, tax consultant.

“The main reason is the relatively low premium on household insurance compared to motor, life and health insurance,” explains Kartik Jain. Although the agent can get 50 per cent commission, it does not amount to much on a premium of Rs1,500.

As a result, few residents are even aware that the premium for insuring their property could be low. For a property with a construction cost of Rs1 crore, the premium inclusive on coverage against fire, burglary, floods, terror or riot attacks is around Rs6,000 yearly. Various discounting schemes are also on offer.

However, the other side of the coin is the fine print: the premium depends on the condition of the building, its surroundings and maintenance. The settlement of claims can be affected by failure to meet the requirements of the coverage, such as a structural engineer’s annual audit of the maintenance and condition of the building. Claims may also be discounted on account of structural changes made without informing the insurance company, or violation of zoning regulations.

“People give away space to commercial entities in residential buildings when there should be a clear-cut demarcation,” says Harsh Roongta.