Too hot to work? Insurance can now compensate for income loss

Mumbai: As climate risks grow more immediate, insurers are seeking new ways to offer protection. The latest is a cover that pays out pre-agreed amounts to individual policyholders when specific weather thresholds—such as temperatures above 42°C or excessive rainfall—are reached.Bajaj Allianz General Insurance has launched "ClimateSafe," a parametric insurance product aimed at individuals vulnerable to the financial effects of extreme weather. ClimateSafe represents a new offering in India’s insurance sector. Claims under ClimateSafe are settled automatically without the need for traditional documentation, with payouts disbursed within seven days. For example, a daily wage worker selecting Rs 500 per day coverage over 15 days would receive Rs 500 for each day that the temperature exceeds 42°C, up to a maximum of Rs 7,500. The objective of the cover is to compensate for income loss when the worker is not able to work due to extreme weather.The covers are termed parametric as the payout is linked to the occurrence of a predefined event measured by set parameters, rather than assessed by actual loss. Pricing is dynamic, reflecting real-time climate data and personal risk profiles and vary widely depending on the liklihood of the weather threshold being breached.Designed for daily wage workers, drivers, shop owners, and event attendees, the product provides coverage against income disruption or additional expenses resulting from extreme heat, cold waves, or heavy rain. Customers can choose their location, risk period (between one and 30 days), peril type, and sum insured. "Climate change is no longer a distant threat. It is a reality that affects our daily lives in visible and often disruptive ways. From flight cancellations due to extreme weather to delays in logistics, supply chains and daily commutes, the financial and emotional toll of climate-related events is steadily increasing,” said Tapan Singhel, managing director and chief executive, Bajaj Allianz General Insurance.The product relies on historical and real-time weather data from sources such as the Indian Meteorological Department and ERA5. Customers can purchase policies online, via mobile app, or through the company’s distribution network.Proponents of parametric insurance argue that it offers a simpler, faster alternative to traditional claims-based insurance. Whether such products will gain broad adoption in India, where insurance penetration remains low and weather volatility is rising, remains to be seen.