Parametric insurance pays out automatically when a pre-agreed threshold is crossed — for example, if rainfall falls below 200 mm or temperatures rise above 40°C. There is no need for traditional damage assessments. Payouts are based on real-time data from trusted sources like the India Meteorological Department or NASA MERRA.
Traditional insurance requires physical inspection and claim verification after a disaster. Parametric insurance is faster — it is triggered by data and can settle claims within hours. This reduces delays and supports quick recovery.
Parametric insurance can cover a range of weather-related events:
It is also applied to transportation, manufacturing, livestock, and renewable energy sectors.
Countries like the UK, Pacific Island nations, and African countries use parametric insurance for disasters ranging from droughts to floods and cyclones. It has proven effective across geographies.
Parametric insurance is emerging as an efficient tool for climate resilience. It pays out automatically when specific weather thresholds are breached, enabling quick recovery without long claims processes. Already applied in agriculture and energy sectors across India, it offers fast financial support during disasters. With global success stories and domestic pilot projects, India now needs a clear regulatory framework, financing model, and State-led scale-up to harness its full potential in combating climate-induced risks.
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