Insurance Policy in China’s earthquake

Report Submitted

By

Student Name

Course Name

University Name
Table of Contents
Abstract ..................................................................................................
Abstract

The purpose of this paper is to investigate whether insurance laws protected those who
suffered in the Wenchuan ...
Introduction
The aim of the reports is to analyze the insurance policies in China and about the legal issues
of recoveries...
operated until year 1996 when earthquake prediction expectations led insurance companies to
start excluding earthquake dam...
The insurance policies in other countries like Japan and New Zealand are already introduced
before China as because these ...
Wenchuan earthquake in 2008: Case Study
On 12 May 2008, there happened a catastrophic earthquake which has changed the sce...
The government didn’t take action immediately and therefore, the things went wrong and
people suffered more in China. Reco...
were slowly healing and the people of Sichuan are embracing the challenge of rebuilding
their cities better and stronger.
...
Insurance Policy of China’s earthquake
From 1950 the government of China introduced the insurance policy for earthquake in...
China Pacific Insurance described that the property insurance department of the China Pacific
Insurance would implement on...
The societal role of catastrophe insurance
There are millions of people who live in the area or locations where there are ...
The other damage happened in China before 2008 by the Great Hanshin earthquake, because
of which the total losses exceed b...
The societal life in China is very hectic in the areas where there are high chances of stroking
the catastrophic incidents...
Insurance policy regarding to earthquake in other countries
Insurance policy regarding to the earthquake in other countrie...
government but for the more excess coverage for the buildings the protection is given by the
insurance companies not by th...
Fig: Historical change of penetration rate for residential earthquake insurance in Japan,
1966-2000
This above figure sugg...
Impacts of Insurance Policy of earthquake
The earthquake insurance policies and rules & regulations affects the humans and...
affected region. Chinese insurance companies face claims on property and casualty policies
and life insurance policies.
As...
Legal issues of recoveries and remedies in China
The government of China tried to provide the all necessary help and the i...
After the earthquake, it is needed to reconstruct and rebuild the life of the people though the
help of the government and...
Discussion and Conclusion
China is the country which belongs to the earthquake region where probably there is high
chances...
References
1. Asian Development Bank (ADB). 2009. Loan to the People's Republic of China for
Emergency Assistance for Wenc...
16. Woo G. (2006) Diaspora Disaster Insurance.

International Disaster and Risk

Conference, Davos, Switzerland.
17. Insur...
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  1. 1. Insurance Policy in China’s earthquake Report Submitted By Student Name Course Name University Name
  2. 2. Table of Contents Abstract ................................................................................................................................................... 3 Introduction ............................................................................................................................................. 4 Wenchuan earthquake in 2008: Case Study ............................................................................................ 7 Insurance Policy of China’s earthquake................................................................................................ 10 The societal role of catastrophe insurance ............................................................................................ 12 Insurance policy regarding to earthquake in other countries ................................................................ 15 New Zealand ..................................................................................................................................... 15 Japan ................................................................................................................................................. 16 Impacts of Insurance Policy for earthquake .......................................................................................... 18 Legal issues of recoveries and remedies in China ................................................................................ 20 Discussion and Conclusion ................................................................................................................... 22 Recommendation .................................................................................................................................. 22 References ............................................................................................................................................. 23
  3. 3. Abstract The purpose of this paper is to investigate whether insurance laws protected those who suffered in the Wenchuan earthquake in 2008, which was one of the most catastrophic disasters in the Chinese history. It will look at the insurance legislation and its effects on protection of property and economic losses, and discuss the issues in the legal procedures. Finally there will be a comparison of laws in China and other countries. Statistics were acquired by conducting research among big insurance companies in China, such as PICC, CIRC, and Huatai Insurance Group. It was found that numerous people suffered in the earthquake but only a small number of them were insured. The statistics also show the difficulties happened in the process of offering and receiving insurance, such as how to deal with the property of ownerless, and how to pay the successors after deaths of the insured and beneficiaries. The paper will take a deep look at the legal procedures and analyze why insurance laws did not provide the victims in the earthquake with enough indemnity. There are some reasons by which the insurance didn’t happen to China perfectly as it should be. The focus is on to analyze the difference in Chinese insurance policies and to the other countries like Japan and New Zealand. The impacts of the insurance policies on the humans who are affected with these natural disasters like earthquake have been introduced too. In conclusion, a better legal insurance system needs to be established by the government and the National People’s Congress.
  4. 4. Introduction The aim of the reports is to analyze the insurance policies in China and about the legal issues of recoveries and remedies, especially compensate for property and economic losses after Wenchuan earthquake in China. This earthquake happened in Sichuan Province of China on 12 May, 2008 which caused the losses to the humans, land, and buildings there a lot. More than 88,670 humans became dead or missing, more than 374,000 people got injured, more than 5.5 million buildings destroyed in this earthquake. There happened a huge damage because of this terrible earthquake and the estimated loss was of more than $20 million but out of that there were only 5 percent that were insured only. The Wenchuan earthquake was the largest earthquake that destroyed the Sichuan province since 1976 Tangshan earthquake. In this misfortunate situation the insured fund was done by the government and public endowment. As because of huge loss the insurance companies also showed their interest for future that they will take up the responsibility in future issues of these natural tragedies. The earthquake insurance is one of the most effective and equitable instruments to disperse earthquake losses. The earthquake risk management and the possibilities of the new insurance are in China not much secure and better. The insurance for the earthquake is considered as the instrument for the earthquake risk management. The premium rate for the earthquake insurance decides the value of the insurance and the insurance industry. The physical damage in this earthquake in China was insured to the some limit of the total loss by the government and public authorities and more insurance plans for the future to overcome the losses from these unfortunate incidents occurred naturally. The catastrophic insurance is defined as a contract that is sold by the insurance companies to the people so that it can help to the people in case of natural disasters to compensate their looses. Because of the natural disasters there might happen a huge financial burden on the government for the fund relief and to restructure, recovery of the affected humans. The unfortunate insurance can reduce the burden of the government while natural disasters. It relieves the burden through spreading the risks and hence the costs of natural disasters. The allocated prices of the catastrophe insurance policies can help in providing the proper incentives and thus increases the chances of having the future damage from natural hazards through influencing the investment of the fund and development of the land The starting of the earthquake insurance policies happened in the People’s Republic of China (PRC) but ceased operations in the late 1950s. After some time around 1980s the Insurance policy got resumes because of Tangshan earthquake in year 1976. This insurance policy
  5. 5. operated until year 1996 when earthquake prediction expectations led insurance companies to start excluding earthquake damage from the general terms of property insurance. The natural disasters issues like earthquake, flood from year 1996 have been supported mainly by the government funds and public fund donations gathered from the public and also from the private individuals and private entities. Earthquake insurance already has a basis in law and other policies in the PRC. In the 11th 5- year plan of the Chinese Government, the government also introduced already about the earthquake insurance or any other natural disasters. The main aim of this plan is to reinforcing the country’s ability that will prevent and will help in reducing the natural disasters looses, like earthquakes. In China for the current disaster reduction program, in the eleventh five year plan named as National Plan of Comprehensive Reduction so that the natural disasters can be reduced to such a great extent. There has been introduced a new co-financiering mechanism to help to the government so that the effective insurance and financial help can be done for the affected people under the National Plan for PRC earthquake prevention and Disaster Mitigation program for the period 2006 to 2020. The earthquake incidents happened earlier in the China gave insight to the government of the China to set the new options for reducing the financial burden on the government and also called for the insurance for the last 10 years. Earthquake insurance has not yet completely supported or established in the PRC. In China, there were more than 96 percent of the total claims done for the insurance as 239000 were settled by the government and insurance companies but still till yet, 2012, there have been left some claims on building projects that were got destroyed in this terrible earthquake and these left claims about insurance are still remain to be assessed. The Chinese insurance companies paid the total amount of more than 1.66 billion Yuan for the claims during Wenchuan earthquake as of May 12, 2008 as based on the published report by China Insurance Regulatory Commission. According to CIRC, out of the total people who responded to the insurance policy before happening of the Wenchuan earthquake, there were 12900 policyholders who were confirmed dead in the Wenchuan earthquake, more than 742 got disable and more than 3343 got injured in this quake. ----------------------------------------------------------------------------------------------------------*The data is taken from the China Insurance Regulatory Commission (www.circ.gov.cn), 2012.
  6. 6. The insurance policies in other countries like Japan and New Zealand are already introduced before China as because these countries are most earthquake prone countries. In New Zealand there are thousands of earthquakes occurs in a year but out of them only 100-150 are strong enough to destroy the humans and properties. The government's Earthquake Commission (EQC) was established in 1945 in New Zealand to provide earthquake and war damage cover for purchasers of fire insurance. Later, cover for other natural disasters was included and, later still, cover for war damage dropped. In Japan also, there is Earthquake commission who takes the responsibility to make sure that the people of Japan have applied for the cover insurance in case if any catastrophic earthquake happens. The compensation for the property is also provided because most of the damage occurs to the property. Thus, the whole scenario is all about the insurance, legal policies, and recoveries, remedies and compensation for the buildings in China during earthquake and after the earthquake.
  7. 7. Wenchuan earthquake in 2008: Case Study On 12 May 2008, there happened a catastrophic earthquake which has changed the scene of China’s province Sichuan in Wenchuan County. The massive earthquake with intensity of 8/0 according to Richter scale struck Sichuan Province’s Wenchuan County. In this massive earthquake in Sichuan province, there had been huge loss in human and financial terms. More than 120 million people in the Sichuan and the nearby areas like Gansu, Yunnan, Chongqing and Shaanxi were affected because of this catastrophic earthquake with the millions of financial looses because of the damage of the property and industries to the area. Lots of people got injured, millions of people were homeless, millions of people got dead and thousands of people were missed. The given statistics in introductory section above taken from the published report on CRIC official website, that the loss was more than in the history of China in this Wenchuan earthquake as of May 12, 2008. This catastrophic earthquake, damaged or destroyed the millions of life, homes and more people became homeless. The main area affected by this earthquake was Sichuan area where the scene was bit horrible because there seemed like nothing left either human or property. This earthquake caused the extensive damage to the basic infrastructure that also include schools, colleges, universities, roads, hospitals, water systems and homes with the other industries too. Also, the bridges, forests and mountains too nearby got damage because of this catastrophic earthquake in China. Not only on 12 May 2008, but also on 30 May 2008 a second earthquake with the intensity of 6.1 measured on the Richter scale struck Sichuan and Yunnan Provinces, caused the huge losses again too and hundreds of people got injured and also caused the huge financial looses in China because the earlier Wenchuan earthquake damage or destruction was not yet covered fully and this new earthquake too early made the more damage. These two simultaneously earthquake caused the huge loss to the economy of China. The children got very badly affected because of these earthquakes. The Wenchuan earthquake, cause damaged to more than 13000 schools in Sichuan area and more than 6500 schools in Gansu area because this earthquake struck during the afternoon time and all these children were studying in the schools. Number of students got die and number of students got missing due to this earthquake. After happening of this incident the government took action to recover and reconstructing the entire damage because of this catastrophic earthquake. The people who forgot to take insurance policies didn’t get the benefit from the government and from the public collected fund. The people who got suffered in this incident rebuilt the lives and communities and reconstructing the buildings and also started their own businesses.
  8. 8. The government didn’t take action immediately and therefore, the things went wrong and people suffered more in China. Recovery and reconstruction programmes are anticipated to continue for an additional two year because the damage was too huge and it was not possible to recover that easily because of the economic problem in China. The below is the given picture for the area it got damaged because of the catastrophic earthquake. It shows that more of the area of China got damaged but mostly terrible damaged happened in Wenchuan County. Fig: The affected area of China due to this earthquake This earthquake in China made large impact on the people and their lives than any other earthquakes in the history of the China. In year 1976 Tangshan earthquake struck which made the earlier impact on the people’s life but this time it was very dangerous. The people from china helped to each other because of the size of the event and also it was worthy too. In this horrible event, the government of China responded very quickly and with strength to help the affected regions by sending the help troops, remote help centres, and saved the lives from under the rubble and also provided the shelter and home to the people who became homeless or displaced from one place to another or missed because of this catastrophic earthquake. The human from all over the China moved to the affected regions to help to the affected people in this earthquake and also sent the financial support to recover the looses and help in living their lives easily. After the six months of happening of this incident in China, the wounds
  9. 9. were slowly healing and the people of Sichuan are embracing the challenge of rebuilding their cities better and stronger. In Beijing, and in government offices in the entire China this Wenchuan earthquake still remained as the reminder about the looses in the earthquake and put a question against the government to made new best policies to take care of the natural disasters. This incident served as a harsh reminder to the Chinese government about the steps taken by the government in past because the policies and regulations made earlier were not able to provide shelter to the nation from the force and devastation of natural disasters like earthquake, floods etc. This increased the cause of risk mitigation in financial and economic conditions of the government that time. All the government officials then planned the emergency situations effectively and also prepared for the next upcoming natural disasters based on the city need and danger may occur there. It has been found in China after this earthquake struck that the exposure towards the earthquake in terms of finance, relieving activities were not so much god and big that can handle the situation immediately by the banks, financial institutions, insurance companies and government too. The insurance companies also accepted after this damage that because of poor insurance policies and prior backup or plan for the future incidents made huge trouble because at the same time it was not possible to recover the losses and reconstructing the buildings and giving the new life to the humans. The China Insurance Regulatory Commission (CIRC) explained after this catastrophic earthquake that this is the key player in maintaining and controlling the new policies and plans for controlling the future incidents. The insurance regulator for China mentions that it was very difficult to preparing the immediate control for the huge damage and loss by this Wenchuan earthquake. The compensation and restructuring of the buildings, humans and changing their life in to the new structure is not so easy to maintain everything immediately but it gave a sign of preparing the most effective policies and control. CIRC introduced a new Policy after the incidents happened in China as Natural Hazard Insurance Scheme for the people to avoid any risks happen during the natural disasters. The scheme developed by the government was very robust and consistent in creating the standard database and the nature of the assets can be identified easily and the policy can be implemented effectively immediate. This shows that the Wenchuan earthquake was so dangerous that it caused a huge loss to the humans and to the government in terms of financial funding. The Chinese government introduced new schemes and policies to control the future incidents based on this incidents because it was the worst possible incidents in the history of China.
  10. 10. Insurance Policy of China’s earthquake From 1950 the government of China introduced the insurance policy for earthquake incidents that might happen in to the future but this policy got stop during 180s but after that again from 1996 this insurance policy got resumed but still the insurance policies could not cover all the loss happened during the earthquake. After the Sichuan earthquake the government of China became serious and made new policies to the help of the people suffered in the natural disasters. The central government of China asked to number of the insurance companies to give support to the devastated areas because of the catastrophic earthquake by means of relaxing their insurance compensation standards and also making the more helpful promoting plans to recover and compensate the loss. The government also proposed another insurance plan under which the insurance companies can issue the instant insurance to the people in case of most circumstances cases like earthquake, floods etc. This rule was introduced in the disclaimer of the insurance companies so that the instant support and fund can be relieved to the affected people easily. In china numbers of companies have agreed after these incidents to support any kind of help to the affected people because of the natural disasters. The insurance companies also proposed other insurance policies and advised to take appropriate actions in case of circumstances like earthquake etc. According to the Minsheng Life Insurance Company, the disclaimer clause for the earthquake insurance includes all the products provided by the company would be lifted this time of natural disaster and all the damages occurred during the natural disaster will be paid by the insurance companies as full payment for its earthquake liability. All the insurance payment will be given to the people who has affected in this earthquake in China in May 2008. Every death and injuries occurred because of the natural disaster will be compensated according to the normal rules and regulations for the incidents in China. For clients who have lost their insurance policies during the quake, the company pledges that it would pay damages without the policy. More than this, according to another insurance company Aviva – COFCO Life Insurance the insurance disclaimer would be lifted for all the products and services of insurance during the natural disasters and will make the complete payment for the compensation of its earthquake liability. There are also other companies who introduced the insurance plan to make relax or provide help to the people affected in the natural disasters and these insurance companies also already relaxed the earthquake insurance compensation standards according to the need in case of natural disasters.
  11. 11. China Pacific Insurance described that the property insurance department of the China Pacific Insurance would implement on site loss and damage during the natural disaster and also will provide the full compensation for the insured people on site for the accident insurance cases where the earthquake insurance liability is clear for the damage and all the damage are visible to the property. According to other insurance company named as Ping an Annuity, the earthquake insurance has lifted the compensation restrictions with regard to the natural disaster and in regard to the designated hospitals; self paid medicines and late applications and also revised the standards of the insurance compensation standards. Similarly, in China another insurance company Taikang introduced the new policies regarding to the natural disaster like earthquake named as preferential policy where the people can easily pay the premium after the deadline who are unable to pay the policy with time because of the earthquake which might cause delay in the policy and the policy will be valid after the quake as well. This insurance company in china also provide the interest free loans to the affected people so that they can settle their life if affected because of natural disaster and also provides waive handling fee for free for re-issue of the insurance policies. In China’s Sichuan province mostly people are the customers of the China Life insurance company and therefore the company to help all these customers shifted the details of each customer to the other Jiangsu Branch so that in any case if the disaster happens there will not be any issue to the people who have done the policy will get the full payment. The other insurance company China Pacific also transferred the call of all the customers’ details to its central office in Shanghai so that in case of disaster the enquiries and calls can be handled from its Shanghai head office to make the process easier so that the people from the devastated areas can easily claim for the earthquake insurance. In year 2008, just after the natural disaster CIRC held a meeting to ensure the insurance and fund settlement of the devastated people. In this CIRC meeting, the development and improvement of the insurance policies were discussed to make the process effective. The RMS of China made partnership with IEM so that the earthquake process can be handled easily and also the insurance can be settled easily. The impact of the incidents also leads to the conclusion that supports the advantages of a robust risk management culture with its investment in the insurance fund by the government to collect the data of the insured assets.
  12. 12. The societal role of catastrophe insurance There are millions of people who live in the area or locations where there are more chances of natural perils such as floods, typhoons and earthquakes along with the higher concentrations of value and the increased vulnerability of infrastructure has led to a rapid rise in worldwide exposure to losses from natural catastrophes. Societies changes a lot because of these catastrophic earthquakes because of damage and losses of humans and financials, buildings and infrastructure, industries and employment etc. The people’s mentality changes after this kind of shocks that sometime occurs because of the earthquake or any other natural disasters. The same happened in China Country where because of the natural disaster occurred in 2008, named as Wenchuan earthquake which was the worst earthquake in the history of China and caused the billions of loss and millions of human died, injured and got missed. Due to this the government of China and also the role of public were very important to help the people and raising their lives and making their lives to start by a new way. The other private institutions, firms, and individuals also collected the fund to help financially. Therefore, societies play an important role in deciding the fate of the affected people and giving them life. Also the government and insurance companies make the life easier for the affected people in the earthquake disaster that struck there very badly. Even though not all the affected people were insured by the government and the insurance companies but still few of them were insured to live their life with new beginning. The government and insurance company policies changed the society’s life style and affected them mostly. The insurance became very helpful in protecting the societies in China during the catastrophic earthquake. The insurance policies in each country are differing and also play a different role in protecting the societies through the catastrophic insurance. But in most of the countries the insurance policies are more widely available for the wind perils rather than flood or earthquake disasters because the government didn’t take it more seriously and also the insurance companies were not able to cope up with this kind of issue as most of the people didn’t go for the earthquake insurance policies. But after this Wenchuan earthquake struck in 12 May 2008, the scene of insurance industry have changed a lot and the government also asked to the insurance companies to make special provisions for the natural disaster affected areas. This now affecting the societal life of the people and making them more secure about the financial looses that will happen because of the natural disasters. For example, it can be observe that in Northridge Earthquake, where in September 2011 there struck a property loss of more than US$ 40 billion with the insured looses of US$15 billion.
  13. 13. The other damage happened in China before 2008 by the Great Hanshin earthquake, because of which the total losses exceed by US $100 billion but insured looses only reached up to the US $2 billion due to limited payout rates from Japan’s residential insurance at that time. By contrast, insurance claims for Windstorms Lothar and Martin in Western Europe are estimated to have paid for more than 50% of the total economic losses. It has been found from the surveys and research of the earlier reports on the natural disasters and its effects on the societal life. Mainly in china, Japan and New Zealand area this natural disaster struck a lot and so affects the social life more. Also in the developing countries nearby China, the earthquake policies are introduced a little bit to ensure the protection of the societies but not that like as in more wind peril countries. The research shows that insured economic loss is always less than the general economic loss worldwide. There is a huge discrepancy that exists in the world between the economic and inured looses that differs from country to country as this difference is higher in China than Japan. This insured loss is carried out by the insurance industry, government and public in the developed countries like China where there is high loss happens frequently but in case of developed countries like India, the loss is carried out by the government and individuals only not by the insurance industry. This happens because the individuals only go for the insurance policies when their financial budget support them but in other countries like China because of high chances of having the earthquake time to time it is the responsibility of the insurance companies and government to provide the protection to the whole society which might affect in future because of these natural disasters. In the regions where there is low insurance penetration and catastrophic incidents like earthquakes may have the devastating effects on the uninsured individuals also in case when the chances of accident or disaster are low. This can be said that the societal life in the areas where there is high risk to the areas where there is low risk of having the catastrophic incidents is different. The people who are living in areas like China now more secured and protected by the insurance companies and the government than other countries. For example, in China if a restaurant that annual worth is US $24,000 is destroyed because of the natural disasters and this restaurant is not opened for the longer time than the total loss will be of US $70,000 so the loss for the insurance companies and to the government occurs more. So when the business or individuals receive the compensation that is vey less than the actual loss happened during the catastrophic natural incidents. It is not possible to compensate the payouts very easily in early years it takes time to get the compensatory payout.
  14. 14. The societal life in China is very hectic in the areas where there are high chances of stroking the catastrophic incidents. When many thousands of uninsured individuals are affected by an earthquake, the ripple effect across the economy can threaten a developing nation’s economic growth. Fig: Insured and uninsured losses for major natural catastrophes worldwide The above figure shows about the uninsured economic looses and insured economic looses. It has been seen that during 1950s the gap between the uninsured losses and insured losses were less but in 2000s the gap is higher. If the higher earthquake insurance penetration rates are to be supported in case of the emerging economics like in China, then in this situation the protection of the society is higher because of the more payout rates to the looses occurred in the natural disasters. Therefore, it can be analysed from the above discussion that in case of the natural disaster if the insurance is not followed by the insurance companies and by the government then the chaos of the human life may be bitter. The social lives are more protected in China now than other countries but already in Japan and New Zealand there is more strong insurance policies for the humans and to protecting the property too.
  15. 15. Insurance policy regarding to earthquake in other countries Insurance policy regarding to the earthquake in other countries are more different than in China. In Japan and New Zealand the insurance policies and the government rules & regulations are not like as the China. In China the introduction of the insurance policies are more earlier than New Zealand and in Japan the insurance policies are far earlier then China. The below is the detail analysis about the other insurance policies in Japan and New Zealand. New Zealand In New Zealand there struck a Napier Earthquake in year 1931, there was a huge loss because of the earthquake so for this there was only insured for fire not for the other reasons. In this country the insured was only for fire, at all but not for the other looses. After the fire insurance damage, the other insurance coverage was offered for shaking damage as saying the optional condition other than the fire looses. After this there also struck another earthquake in year 1943, as Masterton Earthquake described that most of the properties that got damage in the earthquake didn’t have the any kind of insurance. The Masterton Earthquake struck during the Second World War so during this time after the world war the recovery or coverage was done by Earthquake commission and War damages commission in New Zealand. This coverage was done for the future looses happening because of the war and earthquake. The initial premium given to the people was 0.25 percent before the world war but after the world war the insurance coverage percentage got reduce to 0.05 percent. In New Zealand the insured sum for the future looses changed and also the insurance companies offered the additional insurance value in exchange of the voluntary basis. In year 1993, the insurance scheme was restructured to paying the limited coverage to the damaged residential properties and the methodology that was used for the damage as first loss replacement value basis. In New Zealand for the first time, for the earthquake risks the scenario based modelling were introduced and this was controlled by the Earthquake Commission of New Zealand which is generally referred as EQC. There for the damage of the industrial properties and businesses the standard inclusion in the fire policies is given as full replacement value. Not the government but all the insurance companies are responsible for the commercial and industrial risks. In New Zealand, for the earthquake damage protection under the EQC value the residential protection coverage are allowed up to the NZ $100,000 for the buildings and NZ$20,000 for the contents. This fund is provided on first loss basis scheme and this is offered by the
  16. 16. government but for the more excess coverage for the buildings the protection is given by the insurance companies not by the government. ECQ is provided only for those individuals or owners who have fire insurance covered already. The penetration of the insurance in this country is very higher with approximately 95 percent of privately owned and approximately 75 percent of contents insured. This is how the insurance policies provide the protection to the residents of New Zealand. Japan Japan is a country which is situated in the sea area and in this area there are high frequencies of stroking the natural disasters. Earthquake in Japan, because of the dense urban population the impacts on the economic and social life of the government and to the people of the country are very high and it plays a very important role in their lives. The Japanese insurance industries are very unique and always face the unusual degree of challenge that accumulates the sufficient reserves while covering the catastrophic losses in the country. Because of the high degree of the exposure in Japan, there was no coverage for the protection for the earthquake damage till year 1956. After this year, it was found that the people are suffering more because of the frequent disasters and getting the lots of financial looses then the industrial insurance introduced in Japan after year 1956 with the help of the international insurers so that the backing for the coverage can be done. Now days the insurance policies in Japan, cover mostly the property and alternative accommodations if anything happens because of the earthquake in Japan and the fund is paid when it is claimed on basis of tiered damage. The premium discounts are also offered to the people in Japan based on the location, property type and its age. The insurance scheme for the residential of the Japan was developed over the series of time. There have been a number of modifications and restructuring of the insurance scheme because of the changing conditions of the earthquake and need of the financial help by the people. The below figure suggests that the insurance policy in Japan for the earthquake initially in year 1956 was on an average but over the span of time it got reduce and then after year 1996 it again got increase as per the need and the frequency of the catastrophic natural incidents. After the Kobe earthquake in Japan, the structure and the premium of the earthquake insurance got increase than earlier insurance limit and coverage because it was necessary for the Japan to have changes.
  17. 17. Fig: Historical change of penetration rate for residential earthquake insurance in Japan, 1966-2000 This above figure suggests that how the Japan government changed the insurance policies according to the need of the catastrophic damage and to the financial requirement. The below graph analyse the accumulated reverse that can be claimed for the future. As suggested that from the year 1976 till year 2000 the accumulated sum provided by the Japan government is higher than the EQ reinsurance company and by the private insurers. Fig: Accumulated reserves for future claims
  18. 18. Impacts of Insurance Policy of earthquake The earthquake insurance policies and rules & regulations affects the humans and to the economic, financial situations. There have been a number of earthquakes in Japan, China and New Zealand and affected the life of the humans. Because of the earthquakes there have been a huge loss in terms of human, infrastructure, buildings, school & colleges and financial too. Millions of people died, millions of people got missing and millions of people became homeless because of these catastrophic incidents occurred in these countries. The number of powerful earthquake that hits the South Western China few years back where the devastation for people in the affected region but there was a little bit effect on the economy of China. There is only one percent of China’s population who lived in the quake affected areas in the Sichuan province so normally the loss because of this earthquake in the entire China but only occurred loss in Sichuan Province. The economic conditions in the areas where this earthquake struck belong to poor areas and people only belong to the impoverished farmers. This hits the social life in a new ways because the human losses are more than the industrial losses because of all humans in the Sichuan province belong to farming business. In China the Wenchuan earthquake made huge impact on the Sichuan province because of this earthquake caused the huge loss in the Sichuan province in the history of the China’s country. Already, in China there is a serious issue because of the inflation rate that is around at 9 percent per year and the China government is rebuilding and restructuring the financial activities and expenses and using the fund to rebuilding the earthquake affected in the region for the sake of the goods of the people and to the people who became homeless. The insurance policies in the China are better than the other countries like Japan and New Zealand where the insurance policies were introduced in early 1950s but in China it is for a long time. The insurance policies are making the great impact on the human, social, economical, and financial activities in the affected areas due to the catastrophic earthquake in the Sichuan province. The central government of China limit the effect of inflation and tried to help to the affected people because of the earthquake. The public and government provided the relief by slowing the spending rate to other activities and used the financial resources to the earthquake affected areas. Earthquake also affected the financial crisis and triggered the increase in the financial crisis because of the lots of economical looses in the earthquake. But the Sichuan earthquake appears unlikely to have a similar effect. The China Banking Regulatory Commission has ordered banks to write off many of their loans to residents of the quake-
  19. 19. affected region. Chinese insurance companies face claims on property and casualty policies and life insurance policies. As these areas where Wenchuan earthquake struck in China were mainly the agricultural areas so it caused the issue to the entire China because in the entire China the food was produced from this affected areas as Sichuan and nearby areas were the biggest food producers in the country. Another question about the earthquake's impact lies in the effect on electricity generation in China, through the disruption of coal supplies and the temporary shutdown of power generation at some hydroelectric dams. Thus it can be said that the earthquake affected the human’s life and the economical condition in China very badly in the history of the China. Also the provided insurance to the human who got affect in the earthquake but this was not much sufficient and also not given to the entire affected people from the earthquake.
  20. 20. Legal issues of recoveries and remedies in China The government of China tried to provide the all necessary help and the insurance to the affected people due the earthquake in Sichuan province in May 2008 but it was not so easy for the people to get all the benefits provided by the government because of the legal rules and regulations while reconstructing and recovering the damages or loss in the earthquake. There are main legal issues that caused the smooth activities for the help for the affected people in China the disadvantaged groups in the areas where catastrophic earthquake occurred, protection for all the people who got affected because of the earthquake, lack of category statistics of the affected people, lack of the insurance companies for the recovery to the loss in the earthquake. The Sichuan area is only 28 square kilometres in China country but the earthquake made the huge loss as there were 529830000 people who got suffered because of this earthquake. The anti disaster unit in China before the struck of this earthquake was weaker so it could not handle the loss easily when it struck in China. The rescue and relief policy in the Sichuan city could not benefit the humans there because of the legal bindings in the area as only the people who have the insurance policy can be benefited only not the others therefore the entire affected group could not get the relief from the central government of China. More than this, in China’s Sichuan province the recovery and remedies policies for the help of the people affected in the earthquake could not help to the people provided by the Central Government as because of the legal rules and regulations. The category statistics also restricts the help provided by the government as compensation for the reconstruction, rebuilding, and financial support to the affected people in the Sichuan province in China. The numbers of the casualties in the government disclosure in regard to the earthquake by the Central Government of China were not as per the standards of the human relief but after the earthquake incidents the policies and the regulations changed so that it can meet the standards of the human relief for the earthquake incidents and can control that easily if this happens again. The non availability of the correct statistics was also the cause by which all people could not get the help as in the records it was not mentioned about the few people’s name and their identity because the category statistics is very important in case of the natural disasters. The statistical data respects for the victims and also reflects the social identities if it is not perfect then this will restrict the government to help to the affected humans in the Sichuan province in China.
  21. 21. After the earthquake, it is needed to reconstruct and rebuild the life of the people though the help of the government and individuals so that the effects can be perceived by the earthquake differentiate dramatically in the rural or village area. There are also some more legal issues which will restrict the recoveries and remedies, especially compensate for property and economic losses after Wenchuan earthquake in China.
  22. 22. Discussion and Conclusion China is the country which belongs to the earthquake region where probably there is high chances of catastrophic earthquake which causes looses to the Chinese country mostly. The earthquake cause heavy losses to the humans as well as the financial losses. The Wenchuan Earthquake was the strongest earthquake in the history of China because it was so terrible that millions of people got died, got missing and became homeless and also the financial loss was in billion dollars. The government introduced number of insurance policies to help the affected people in present and also to the future losses. The government of China also proposed solution with the help of the other leading national and international insurance companies so the damages can be recover easily and the society in the affected areas can be protected. Every person living in those affected areas needs financial support to start his life with new beginning. This earthquake in the last 30 years was the most terrible and strong earthquake which is considered as the catastrophic earthquake caused by natural disaster. The shockwaves of the event will be felt for many years to come. Almost half of the population of China was impacted by the earthquake, and the widespread destruction and loss of life will leave an everlasting imprint on the landscape and the people of Sichuan Province. Recommendation  The earthquake insurance provides the help to the government of the country and to the people who are affected because of the earthquake can get the financial help to start their lives again.  The pricing of the earthquake insurance policies can provide the proper compensation to the affected people in terms of financial aspects and also to the accommodations to the homeless people.  The government need to introduce as many as insurance policies which are very helpful and flexible to the humans who got affected or suffered because of the catastrophic incidents struck in the Sichuan province of China.  The insurance companies should help the government in order to make the fund policy very easier and instant fund should be accumulated to the affected people.
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