Surveyor role in Claim settlement - Parametric Insurance, what ??

Ever imagined how Claimants feel whether or when their claims would be settled !?  Around two decades ago ! – a Senior Insurance Surveyor while discussing the future of loss assessors went ballistic stating that the demand for the community would only be upward given the increasing penetration of insurance and the increase in no. of Insurance Companies. 

 

Insurance is based on sound tenets… the founding principles are: Utmost Goodfaith, Insurable Interest, Indemnity, Subrogation, Contribution,.. .. …  In property Insurance, there has to be a subject matter and loss or damage to it would form the nuclei. In general,  insurance is against fortuity – something that can occur or not happening and the policy holder standing to lose by its occurrence ~ the avowed principle of indemnity – would respond by placing back the policy holder in the position that one was prior to the loss.   Typically a premium is paid in return for a promise to cover the actual loss incurred of an incident or named peril.  There has to be the subject matter (insured property); incidence of loss / payment is made only after an actual loss assessment. 

Some of these may not be applicable in Liability insurances / Health Insurances  – yet can you think of a situation where Policies pronounce a payment upon a specified occurrence or event – regardless of financial loss and burden of proving such pecuniary  depravity !!!  - and more so such Insurances are operative in India too !!  

These are Parametric solutions  and when  executed as an insurance contract, the policy follows the same accounting rules and principles as any other insurance contract.  Pure parametric covers  provide a pay out of a specified amount upon occurrence of a certain event, regardless of any economic loss sustained by the client. They are generally executed as derivatives. "Hybrid" covers where both a parametric (pre-defined event parameters) and an indemnity condition (proof of loss) must be fulfilled for the policy to trigger a payout. Such covers are structured as insurance contracts. 

Parametric insurance – while a newer concept – is arguably even more simple than traditional commercial property insurance.  It is an agreement to make a payment upon the occurrence of a covered event meeting or exceeding a pre-defined intensity threshold, as measured by an objective value (or parameter – hence the name 'parametric insurance'). 

Parametric insurance is a non-traditional, index-based insurance that pays out a pre-agreed lump sum when a specific, objective trigger event occurs (e.g., hurricane wind speed, earthquake magnitude, rainfall level), rather than indemnifying actual losses. It provides rapid, transparent compensation without requiring loss adjusters, making it ideal for immediate cash needs after disasters.  Instead of proving damage, a payout is triggered by third-party, independent data (eg. Rainfall data or magnitude of earthquake)  of magnitude.  Because the trigger is binary (it happened or it didn't), payout is instant, often within days, removing the long claims adjustment process.     

According to General Insurance Council   - Heatwave Insurance Scheme has been launched by Climate Resilience for All (CRA) and Self Employed Women's Association (SEWA), in which maximum temperature is 40 degrees.  If the temperature is more than 400 degrees Celsius, you will get 400 to 1600 rupees. Two and a half lakh women from Rajasthan, Gujarat, UP, Assam, Jammu Kashmir, Bihar and Maharashtra have been included in the scheme.  If the  temperature   crosses 40 degrees C -    Heatwave Insurance Scheme  will be of great help and support to women who work risking their lives.    On 21 April 2025, Chandrapur in Maharashtra was the hottest. The maximum temperature here reached 45.6 degrees Celsius. There is no hope of relief from the heat even in May-June. That is why now like other countries of the world, parametric insurance has started in India too. 

According to media reports, 'Climate Resilience for All' (CRA) and 'Self Employed Women's Association (SEWA)' together started this scheme as a pilot project in the year 2024. Initially, 50 thousand women from Rajasthan, Gujarat and Maharashtra were included in the scheme. Due to different weather in different districts, the payment amount also varies. Now the Heatwave Insurance Scheme has been expanded in the year 2025. It covers 2.5 lakh women from Rajasthan, Gujarat and Maharashtra as well as Uttar Pradesh, Assam, Jammu and Kashmir and Bihar. In the year 2024, between 18th to 25th May, when the maximum temperature was recorded above 40 degrees, then under the scheme, 92 percent of the 50 thousand women were given additional insurance payment ranging from Rs 400 to Rs 1600.  

Read about this (curiously in Paki newspaper Dawn) in an article titled - In India, heat-triggered insurance offers 'some relief'.  In parametric insurance, payouts are triggered automatically by heavy rain, high heat or even air pollution.  

Clothes seller Lata Solanki used to face a devastating choice when India’s summer heat hit dangerous levels: risk her health going door-to-door for sales, or lose her income? But now the 42-year-old is part of an insurance scheme that pays out when temperatures hit a threshold, so she can stay home without jeopardising her finances. The “parametric” model pays out automatically when specific triggers are breached, in Solanki’s case after two consecutive days at 43.72 degrees Celsius. In 2023, the year before she joined the scheme, Solanki kept working during a heatwave and ended up sick at home for 20 days, losing at least 2,000 Indian rupees ($21) in income. The following year, she received 750 Indian rupees from the scheme, small but more than the cost of the premium, and a relief rather than going in the heat and risking her health.  

Agriculture and construction bore the brunt of such hot weather, and climate change is accelerating the number of days of extreme heat India sees. In India’s northeastern state of Nagaland, the government has insured its entire population against economic losses due to heavy rainfall under a parametric model since 2024.  The scheme began in 2024 with 26,000 women across Gujarat. Their 354-rupee premium was covered by Climate Resilience for All. In 2025, enrolment rose, but the scheme made no payments because the temperature threshold was not met. This year, the trigger has been revised down to 42.74°C, and the scheme aims to cover more than 30,000 women. If temperatures hit the threshold for two days, they will qualify for payments ranging from 850 to 2,000 Indian rupees ($21).

 

Unlike traditional insurance, parametric policies do not require individual damage assessments. Instead, payouts are triggered automatically by heavy rain, high heat or even air pollution.  In parametric (or index based) insurance, payouts are triggered by a predefined objective parameter (for example, earthquake magnitude, rainfall index, or cyclone wind speed) instead of a detailed assessment of actual physical loss.  Because the contract leans on a proxy event rather than item by item damage, on site loss surveys are usually not required for payout decisions.  

Higher temperatures trigger higher payments, but the amount is a one-off, not cumulative. It is assessed and paid at the end of the heat season in September.  Payment thresholds are set based on historical weather data and intended to be “practical, sustainable and aligned to the intended segment while managing basis risk”.   

Interesting !  ~  since am keeping totally away from Insurance, this sounded new to me …….. what about you !!!

 
Regards – S Sampathkumar
11.5.2026