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'I can only rely on myself': Insurance is expensive, unfamiliar to disaster-hit Chinese

In 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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