Daybreak - Why aren't insurance companies super busy after the Odisha train crash?

Episode Date: June 16, 2023

The Indian Railways exclusively provides travellers a 10 lakh rupees worth insurance cover on booking train tickets online for less than half a rupee. Despite this, a large majority of Indian travellers are not covered by any form of travel insurance.Just a little more than 30 crore lives were covered by general and health insurers for domestic travel, according to the annual report of India’s insurance regulator IRDAI. Why?Tune inDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. It's been more than 10 days now since we saw the worst train tragedy in a long, long time. The crash in Odisha that involved three trains left at least 288 people dead and thousands injured. At least 100 of those who died are yet to be identified. Who likes to think about

things going so horribly wrong before they travel? I don't, I'm sure you don't, and neither did most of the people who boarded the Coromandel Express before the accident. Now, how many of these people do you think considered train travel safe enough and did not choose to go for travel insurance? Many reporters on the ground in Odisha told the Ken reporter Rona Kumar Gunjan that most of the travellers on the ill-fated train had not opted for travel insurance. In December last year, the Union Railways Minister had informed the Lokshaba that on an average 8 out of 10 passengers book their train tickets online. Now, why is this piece of information important?

Because when you book your railway tickets online, the Indian Railways exclusively provides you with a 10-lac-rupy insurance at a cost of, and you won't believe this, just 35 pese. It is that cheap. The sum that is insured is provided in the cases of death, permanent total disability and permanent partial disability. Hospitalization expenses for injury and transportation of mortal remains is also. covered within it. But despite this, just around 50% of railway passengers opt for insurance. Why? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I Don't Chase the New Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday the 16th of June.

Basically, just four out of 10 passengers on an average are insured on a train. But that is not even the complete picture. Insurance is only for those traveling on a reserve ticket. Because like I mentioned earlier, you can only opt for it when you book your ticket online. And if you think that is all it takes to get a travel insurance on a train, you're wrong. There are a bunch of other filters as well. For example, the ticket should have been either confirmed or on RAC status at the time of booking. An RAC or reservation against cancellation ticket allows a passenger to travel but does not guarantee a seat.

Passengers on the waiting list and those on unreserved general tickets cannot opt for insurance cover. Which is why what a lot of Rornux report of friends on the ground in the ground in, Odisha were in fact quite right about. They had told him that not many victims of the crash or their families will be able to claim insurance. But that's not stopping the Indian railways and insurers from making the best of what is left. Stay tuned for more. The Indian railways partners with general and health insurers to provide e-insurance covers to passengers. A railway official told the Ken that the ministry has already shared the details of the passengers with Liberty General Insurance and SBI General Insurance. And they've been given guidelines to not reject claims

without consulting the ministry first. Other insurance companies like ICICL Lombard, Sri Ram General Insurance and Royal Sundaram Insurance will also soon be handed over the list. This is an effort to make sure that passengers are able to claim their dues smoothly. Railway officials are also taking the help of insurance companies in reaching out to families of the victims. Meanwhile, other insurance companies such as Life Insurance Corporation, LIC and Egan Life have come up with simplified methods to help families of victims to claim insurance. For example, instead of the claim form, Egan customers can provide a written intimation from the claimant mentioning policy details and date of death, along with a report issued by the Indian Railways or police authorities in lieu of a debt certificate. LIC2 is accepting the list of deceased provided by the police or the railways as a proof of death.

insurance aside, the central government and several state governments have also announced compensation to all the victims, including to those who were travelling without a ticket. The Prime Minister's office has announced an excretia of two lakh rupees for the next of kin of each of the deceased. The injured will be provided $50,000. The railways separately has also promised 10 lakh rupees in the case of death, 2 lakh rupees towards grievous injuries and 50,000 for minor ones. But let's be clear about one thing. This kind of treatment won't always be the case because not every accident is horrific enough to draw the attention of the powers that be.

But infamous or not, even tragedy results in the same list of needs. So here's a question. If you're one of those who book train tickets online but skip over the check-in box for e-insurance, what is stopping you? For the year that ended in March 2022, just over 30 crore lives were covered by general and health insurers for domestic travel. For context, during the same period, almost 12-lack tickets were sold online daily on an average through the Indian Railways online portal. And get this, the incurred claim ratio was a low 31.5% only,

which means that for every 10 rupees collected by insurers as premium, only three was used to settle claims. Travel insurance also covers lost luggage, flight cancellations, among other things. A senior employee of Policy Bazaar, an insurance marketplace, told the Ken, and I'm quoting, this discourages people from paying for travel insurance. They are usually of the opinion, why pay when nothing is going to go wrong? It also keeps the insurers from innovating when there are hardly any takers. End quote.

There is also the ongoing debate around whether travel insurance should be offered as an opt-in basis at all, instead of just making it default for everyone who is buying a ticket. That said, it is not entirely fair to conclude that travel insurance has been a complete dud in India. Post the pandemic, the number of travellers opting for insurance has actually risen by over 65%. But that is mostly because of a low base effect. See, people who say that what you spend on your travel insurance may never really be of use to you are right. But let's remember one important thing. all it takes to disapprove a hypothesis is a single anomaly.

So no matter how many safe rides we've had, it is still not reason enough to not buy an insurance. The railway's insurance of 10 lakh rupees may not look like a sufficient amount to many, but for a majority of the population in India, it is a significant number. And in any case, it is even better to have additional insurance. of your own over and above discover. No amount of money can fill the aching void left by the deceased loved ones. But insurance is always a must-have. So why ignore it?

Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature story. newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host and today's episode was edited by my colleague Rajiv Sien.