(AFP) – Jun 1, 2008
BEICHUAN, China (AFP) — It will take years for the quake disaster zone in the southwestern province of Sichuan to recover, but some people may never be able to get back on their feet because they did not have insurance.
As he stared at the rubble that was once his home, Han Jun knew he had gambled his money away -- like many others, he had no insurance to cover his losses when China's earthquake struck.
"I've got no insurance and I lost everything," shrugged Han, 30.
"I kind of knew we lived in a high-risk zone, but somehow, I never thought we'd have an earthquake like this."
He was proud of the house he had bought with his wife in Beichuan, a town near the quake epicentre, but it was among hundreds of thousands of buildings which collapsed when disaster struck on May 12.
The quake killed more than 69,000 people, according to the latest official toll Sunday from China's worst earthquake for a generation, but nearly 19,000 more are still missing.
Compounding those figures is that the mountainous area is an under-insured part of China, which in turn is an under-insured part of the world.
China's insurers do not offer quake coverage, but after government urging, some companies have agreed to compensate people who had accident insurance.
That will help many businesses -- the problem is that very few individuals had such policies.
In China, insurance penetration -- total premiums as a percentage of gross domestic product -- was just 2.7 percent in 2006, compared to Britain's 16.5 percent or neighbouring Taiwan's 14.5 percent, according to insurer Swiss Re.
Aba Prefecture, where some of the worst devastation occurred, accounts for just 0.17 percent of all premiums in southwest China's Sichuan province.
"You cannot get earthquake insurance here, you can get typhoon insurance, but not earthquake insurance," said Shi Jun, Aba's top official.
"No one dares to protect against earthquakes, because you never know when they will strike and the science is not good enough to predict earthquakes."
A peasant woman working in a field near Beichuan said she had no insurance and knew no one who had any.
"Insurance? Farmers don't have insurance," said the 30-year-old woman. "No one is thinking about money now."
She added: "I've lost my daughter and so many family members. Who can think about money?"
Historically when disaster struck in China, all victims could hope for was some assistance from the imperial government, and that mindset has survived to the present day, according to insurance professionals.
"China has long relied on state finance and public donations in disaster relief and recovery," said Pang Jiying, vice chairman of China Reinsurance (Group) Corporation, according to the state-run Xinhua news agency.
"Only about five percent of direct economic losses are covered by commercial insurance, much lower than the global average of 36 percent."
Insurance is mostly thriving in the more developed and faster-growing parts of China, including big cities such as Beijing and Shanghai.
In a relatively poor inland area like Sichuan a number of factors militate against widespread insurance coverage.
"Culture could be part of it (lack of insurance), and even more important, people think insurance is a luxury in China," said Sheng Nan, a Shanghai-based analyst with UOB Kay Hian Securities.
"First you have to take care of food, housing, clothing and education," he added.
"Because Sichuan is one of the poor provinces, they won't have much money left to buy insurance. They don't see insurance as a necessity."
This year has seen a number of calamities, beginning with the worst snow storms in decades which cost lives and caused massive loss of property.
Later the worst train accident for a decade killed 72 people, at the same time raising awareness about how misfortune can strike so unexpectedly, argued Deng Ting, a Beijing-based analyst with Guodu Securities.
"There have been lots of disasters, and this will increase people's sense of risks. Definitely more people will want to buy insurance," she said.
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