Climate Insurance: Your Weather Shield

Climate change is increasing the frequency and intensity of extreme weather conditions, and it has already started to affect some areas worldwide. With weather conditions changing so frequently, we have witnessed heat waves, floods, and more in the last few years than we have seen before. With these conditions becoming increasingly risky over time, insurers have recognised the need for climate insurance to provide financial protection to people affected in numerous ways by adverse weather conditions and climate change. According to experts, such types of insurance can act as a safety net and offer protection against unexpected events. In effect, climate insurance provides financial protection, peace of mind, and economic stability. 

What Is Climate Insurance 

“Climate insurance is a type of parametric insurance that provides financial protection to policyholders from extreme weather events that are increasing due to climate change. It can provide economic security to the common man, including gig workers, office goers, shop owners, daily earners, or businesses that get impacted due to adverse weather conditions,” says Ashish Agrawal, head- agri business, Bajaj Allianz General Insurance. 

Let us say you own a shop in Delhi and are covered with climate insurance against extreme heat. If the temperature exceeds 45°C for four consecutive days, the policy would kick in and pay you an agreed amount. This would cover any business losses you would face because of fewer customers due to the heat.

If a shop owner in Delhi has climate insurance for extreme heat and the temperature exceeds 45°C for three consecutive days, their policy automatically pays out a pre-agreed amount. This helps cover lost income due to fewer customers or increased cooling costs, without needing extensive damage claims.

What Climate Insurance Covers 

Climate insurance acts as a protection from financial loss caused by adverse weather conditions. It includes a variety of risks such as, unexpected commute expenses due to adverse weather conditions, increased living costs due to higher electricity use, reduced sales from fewer customers during extreme weather, supply chain delays from flooding, leaks from prolonged rainfall, , loss of income for daily wage workers due to severe weather, damage to household items from floods and heat waves, and event cancellations due to adverse weather etc. 

“Dynamic pricing has been introduced for arriving at the premium rate for the ClimateSafe product, which varies on the basis of the risk period, risk location, sum insured, and how early the customer is buying the policy before the risk inception date. Premium would be approx. Rs 400 – 500 for sum insured of Rs 10,000,” says Agrawal.

ClimateSafe, a climate insurance product by Bajaj Allianz General Insurance, the first of its kind in the industry, is available nationwide in India. Other such policies could be in the pipeline.