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Subscribe to RSSIn the U.S., Americans rely on insurance to protect against disasters. In China, families rely on themselves. CNBC Asia's Eunice Yoon has more from Beijing.
Imagine a day-long storm with torrential rains and high winds pounding your home. By the time it blows over, you have lost everything you own. And you have no insurance.
This was the scenario in July for residents of Fangshan, a district 50 miles from the center of China's capital Beijing.
Some 18 inches of rainfall dumped on Fangshan, causing a normally dry river to overflow and flood the surrounding homes. Half of the 77 people killed as a result of the storm were in Fangshan – as were half of the estimated 57,000 people forced to evacuate their homes.
Liu Su Xia, a spirited 60-year-old grandmother, was in her house when the water rushed into the single-story courtyard building.
"I was terrified," she said. "The water was this red color and went everywhere."
She grabbed a ladder and clambered up to the second floor window of her neighbor's house to watch. As soon as the water receded, she climbed back down and began cleaning what she could.
When her 63-year-old husband Xin Zhong Qi returned from the city center, where he was working on a construction site, they toiled together all night and into the next day to salvage what they could.
"There was nothing worth saving," Xin said. "We had to throw everything away."
As for compensation, "the government still hasn't come forward with a plan," Xin said.
'I can only rely on myself'
The flooding in Fangshan highlighted the Chinese state's weaknesses and faults – and also underscored how much ordinary Chinese still have to rely on themselves. In the United States, families rely on homeowners' insurance to protect them against damage from disasters such as Superstorm Sandy, which hit the Northeast in November. But in China, many ordinary people remain unaware of and often unable to buy insurance.
Read more China coverage on NBC's Behind The Wall
Damage from the flooding across Beijing cost $1.6 billion, according to municipal officials. Authorities have supplied temporary housing in Fangshan and announced plans to help create new permanent housing on safer ground.
But there was plenty of popular outrage over the authorities' handling of the disaster, especially the official casualty count, which many believed to be too low. Then there was criticism over the existing emergency response system, deemed too slow and inefficient. Finally, the destruction of so many homes raised concerns that existing buildings in Fangshan were built on unsafe grounds.
After Hong Kong weathers typhoon, anger roils over Beijing flooding deaths
Xin and Liu have not availed themselves of the temporary housing; it wasn't clear whether they were eligible or whether they did not seek out the option.
Miguel Toran / CNBC Asia
Friends help Xin Zhong Qi repair his home after it was damaged by flooding.
"I can only rely on myself," said Xin. "At least 90 percent of the time, you have to rely on yourself."
When asked whether they had ever heard of homeowners' insurance, Liu cackled.
"Aiya! We’re peasants! Who has that kind of money?"
Xin also admitted he doesn't quite understand what it is.
An opportunity?
He's probably not the only one. The concept of homeowners' insurance is still new in China. It was barely two decades ago that private home ownership was re-introduced across cities, when the Communist Party gave millions of state workers the opportunity to buy their government-supplied homes at bargain basement rates.
"With around 250 million households entering the middle class in China over the next five or 10 years, that's a great opportunity for insurance products to reach even deeper in the Chinese population," said Joe Ngai, managing partner at McKinsey & Co.'s Hong Kong office.
Hong Kong offers insight into storm prep
In fact, McKinsey believes China will be the second largest insurance market in the world after the U.S. in 2020.
"We would think about insurance if it was offered to us," said Yu Shuang, another Fangshan resident whose home was badly damaged by the flood. Yu and her husband used their savings to repair their house and to replace their furniture and car. "But we're not sure whether we would want to look at what the government might offer or buy our own."
Xin, however, remained skeptical.
"We're old. We don't have that many years left. Why bother [buying insurance]? And we don't have any money," he said. "Anyway, this was a once in a lifetime event. One big flood in 60 years."
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It's China, a second-world country at best. We have so many shady insurance companies here, imagine what's going to pop up in China. No wonder they are suspicious.
Wait for the Insurance Corporations to Lobby (Bribe) the Chinese Government to make Homeowner's Insurance Mandatory.
Amount of money paid into Insurance Corporations as Insurance Premiums versus amount Received by the Customer (Insurance Adjusters getting bonuses based on how much they saved the Insurance Corporation that they work for.).
Typical Legalized Ponzai Scheme. The Insurance Corporations that are NOT Ponzai Schemes consider their Customers as "Share Holders" and pay dividends from their Profits to their Customers. The Insurance Corporations that are Legalized Ponzai Schemes when they run out of money from their suckers, then demand a US Government Bailout (not a Loan) with all US Citizens ending up paying for their Ponzai Scheme(s).
Wow! The geniuses that come out of the woodwork with their two cents whenever business is the topic. Insurance is the spread of risk over large numbers of people. You either have enough money to self-insure or you do not. If you can't self-insure and there is a lien against your property the lien-holder can require that their interest be insured. You don't agree to that fine don't borrow the money. As far as the difference between a stock insurance company and a mutual insurance company there really aren't any other than how the company is structured. In a competitive playing field price, service, and the financial stability of the company are what matters. What really is a "Ponzi" scheme is the colleges or university where you attended. No, wait. That's not entirely correct. The crime that was committed against you wasn't a Ponzi scheme but a fraud. What the hell is a Ponzai scheme anyway? Is that where the trick you into buying a fake Bonsai tree? Sorry my friend, you've been Bonzaied!
We can't trust ourselves to fend for ourselves.
Insurance is a SCAM. All it does is drive up the cost. If you like to gamble buy a lotto ticket the odds are better.
I am all right with that as long as you have full third party insurance on the cars you drive. I don't really need insurance on your house, etc. etc. as I won't walk by your house.
Sometimes I believe that if people would just "rely on themselves" they would come out ahead!
People of China, beware you might just be better off without insurance unless you really really figure you have to have it for some huge reason as when you rely on others to help you usually end up holding the bag anyways.
If you've got insurance and have a claim you then have to fight with your insurer to to get the claim through as a lot of the insurance companies do not want to pay out of they do not have to it seems.
Look at the Sandy disaster, some people will not be covered because they cannot prove what caused the damage! Wind, water or $$.
That's where the insurance industries has us all over a barrel, they continue to add things that are not covered anymore due to past claims (I assume!) and if you don't keep on your toes when you need your insurance it might not be enough or even cover you anymore.
Insurance is great when it works and its affordable but its still a scam we are all conditioned to accept.
MuddieMike,Good comments.I was broadsided two months ago.The guy lied about not having insurance.My insurance found out that he indeed did have insurance.He was cited for failure to yield.He actually did a road rage.I filed a complaint with the State of California insurance commissioner because his company does not want to pay the claim.My insurance company is going after his because they paid me uninsured motorist claim on my insurance which did not cover out of pocket to repair my car.However,they won't go after his company for me.that's what we get from insurance companies.they want your money but they don't want to fight for their customers.My next step is small claims court.All this stress and I'm not the person at fault for the accident.I'd rather be like the Chinese and save my money and take care of disasters and accidents on my own.
Insurance is just one more scam perpetuated on the American people. You pay your premiums but when you file a claim, you have to jump thru hoops just to get what's rightfully yours. Seems to me that there's plenty of money to give to Afghanistan and Pakistan and the rest of our "friends" but when it comes to American disasters, FEMA has a "formula". Isn't there a formula for the ratholes we support with our tax dollars?
Lots of people have bad insurance experiences because they don't read their policies, or they don't have good agents. I myself would never go without. Mine is always willing to take the time to explain any and all fine print.
Who gives a @!$%# about these people? Our country is going to hell in a hand basket with Obama leading the way and we are supposed to worry about them?
I guess the businessmen and women should over throw the communist government.Then they wouldnt have these issues...Till then stop whining im sure you can get a job at a manufacturing center for walmart goods.