Natural Disasters Cost Billions, But Who Is Left to Shoulder the Burden?

Encouraging higher coverage will be key to preventing rise of insurance deserts in India

- Tapan Singhel

Imagine losing everything to a flood or wildfire—your home, savings, and security—only to find no insurer willing to cover you. The recent California wildfires have revived global concerns about climate change and its role in worsening natural disasters. They have also exposed a growing crisis: the rise of insurance deserts—regions where insurance is scarce or unavailable due to extreme risks and unsustainable losses.

As insurers exit high-risk areas like California, individuals and businesses are left vulnerable without financial protection, forcing governments to intervene with temporary measures.

This raises the question: Could India, prone to frequent natural disasters like floods, cyclones, and landslides, become an insurance desert? In India, low insurance penetration, combined with rising natural disasters and hardening reinsurance rates, creates the perfect conditions for such a scenario.

Who pays the price?

Insurance costs drive low uptake, creating a vicious cycle that hurts common citizens the most. For example, Himachal Pradesh’s 2023 floods caused an estimated loss of ₹13,000 crore, but only ₹1,300 crore was insured. The state received ₹430 crore in central disaster relief and spent ₹4,500 crore on recovery. Who covers the remaining amount? Who helps an entrepreneur pushed into poverty by disaster or a senior citizen whose home is destroyed with limited income to rebuild?