Climate change is not some distant worry anymore, it is here in the form of rapid floods that stall cities and heatwaves that drain daily workers, or sudden storms/cyclones that disrupt day to day lives. As these disruptions are becoming more common, the need for insurance against such calamities is the need of the hour.
Bajaj Allianz General Insurance has recently released a Parametric Insurance plan called 'ClimateSafe' to offer quick financial help when the weather turns extreme.
Here's what you should know about this new plan offering:
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What exactly is ClimateSafe Insurance?
This is a parametric insurance product. In simple words, it doesn't work like your usual car or health insurance, where you make a claim after a loss. Instead, payouts are automatic, triggered when a certain weather condition is met.
If the rain crosses a certain limit, if the temperature soars too high, or if the cold gets too severe, you get paid automatically, without lengthy paperwork.
How Does It Work?
This insurance plan is based on two key factors, Strike and Exit point.
Strike Point: This is defined as the moment when the insured weather parameter (measured in millimetres of rainfall or degrees of temperature) exceeds a predefined threshold mentioned in the policy. If this strike point is reached within the policy period, a proportionate percentage of the sum insured is paid to the policyholder. For policies covering periods longer than one day, multiple strike points may occur, and if they do, the claim would be paid accordingly.
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The system is linked to trusted weather sources like the India Meteorological Department (IMD) and ERA5 for temperature and rainfall data.
Exit point: It is the moment when predefined weather parameters (measured in millimetres of rainfall or degrees of temperature) exceed the maximum threshold defined in the policy. If this exit point is reached within the policy period, the full sum insured will be paid to the policyholder.
It is important to understand that the strike and exit points are unique to each policy, depending on the selected risk, risk location, and risk period. These conditions will be specified on the quotation screen when you purchase the policy and are also detailed in the policy document. Make sure to check such details before buying any policy.
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Who should consider buying it?
This product is especially useful for people whose daily income or essential activities get badly hit by extreme weather, such as:
Daily wage workers
Delivery agents
Taxi drivers
Home service providers
Retail shop owners
Event attendees, etc.
Ordinary home residents who may face extra electricity bills during a heatwave or have household items damaged due to flooding can also consider a plan like this.
The plan, as per its shared details, provides coverage for the following:
Higher living costs due to extra electricity usage (like during a heatwave)
Unforeseen commuting expenses
Business losses from fewer customers during bad weather
Supply chain delays
Accidents caused by heavy rain
Loss of income if you can't work due to bad weather
Damage to household goods from floods or heatwaves
Event cancellations because of adverse weather
Currently, it covers three specific risks: excess rainfall, extreme high temperatures, and severe cold waves.
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How do you set up the coverage?
Policy buyers are given the control to decide on coverage with the following options:
You pick your location (where you want coverage).
You select the risk period (1 to 30 days).
You choose the type of weather risk (rainfall, high heat, or cold).
You set your sum insured (the amount you want to be paid if the event happens).
The premium will be adjusted based on real-time climate data and the options you pick.
How is the claim processed?
There's no traditional "claims process" for this plan. Meaning when the weather trigger happens:
The data is automatically collected and verified.
If the trigger matches the policy terms, your payout is calculated.
The money is credited directly to your bank account.
The process is set up to be automatic when a policyholder files a claim. The bank account details are required so that the eligible claim amount is disbursed to the policyholder's account automatically.
How are payouts calculated?
Here's a simple example to understand this:
Suppose you are a daily wage worker who took a Rs 500 per day cover for 15 days.
The trigger is set at 42°C for your area.
If only 1 day during your cover period hits 42°C, you get Rs 500.
If it happens on any 5 days, you get Rs 2,500.
If it happens on all 15 days, you get Rs 7,500.
What data sources are used to determine strike point?
The plan relies on credible data providers to understand strike points, namely:
IMD Gridded Data for rainfall
ERA5 Gridded Data for temperature
Historical averages are studied to set the baseline, and then real-time observations are used to verify events.
As extreme weather conditions are becoming a routine feature of life, parametric insurance products like these can be good for those who are directly affected by sudden climate changes. However, it is important to know that it does not replace traditional insurance, but for climate-induced risks - it provides fast, automatic help, particularly good for people who cannot afford to wait weeks or months for insurance payouts.
