‘Parametric Insurance’ can provide strong support in India’s climate crisis

As natural disasters are increasing, natural disasters can occur anytime and anywhere. In such a situation, it is now being understood that traditional insurance models are not enough. In such a situation, ‘parametric insurance’ offers an alternative solution.

In a few days, more than 20 floods, landslides and cloudbursts occurred in Himachal Pradesh, causing heavy loss of life and property and affecting the state’s infrastructure. Such weather-related incidents are increasing continuously.

India has faced 764 major natural disasters since 1900, which is more than any country in the world. According to the World Bank, climate change may cause India an economic loss of $56 billion every year by 2030.

What is the solution?

Here parametric insurance has emerged as a new option.

What is parametric insurance?

In traditional insurance, it takes time to assess the loss and decide the compensation. In parametric insurance, the process is fast and data-driven.

The insurance terms stipulate that if a particular weather threshold (such as rainfall amount, wind speed, etc.) is exceeded, the insurance amount will be released immediately.

It uses data sources such as the Meteorological Department, NASA or other satellite-based systems.

Areas of use:

This insurance is useful in sectors such as agriculture, transportation, manufacturing, animal husbandry, where delayed compensation can lead to financial crisis.

It is becoming a viable option for power plants, solar energy parks, and other climate-sensitive sectors.

Global experience:

In countries like Africa, Pacific Islands, and the UK, this insurance is being used to protect against floods, droughts, and storms.

Why is it needed in India?

Risks such as unseasonal rains, hailstorms, and extreme heat are increasing in India.

This insurance can become a safety shield for farmers and micro entrepreneurs, so that relief amount can be received as soon as the loss occurs.

Future direction:

In 2024, the Insurance Regulatory and Development Authority of India has given many suggestions to promote parametric insurance.

Now there is a need for transparent data, low-cost policies, and awareness, so that this insurance model can be implemented across the country.

 👇 Please Note 👇

Thank you for reading our article!

If you don’t received industries updates, News & our daily articles

please Whatsapp your Wapp No. or V Card on 8278298590, your number will be added in our broadcasting list.