NEW DELHI, 6 December 2022: The term ‘parametric crop insurance’ has been gaining popularity in the Indian farming scene over the last couple of years. Also known as ‘event-based insurance’ or ‘index-based insurance’, parametric crop insurance provides coverage against the occurrence of a specific event, mostly natural disasters.
Unlike general crop insurance which covers the actual losses, parametric insurance solutions cover the likelihood that a preset event will occur. It is a contract that calls for a payment to be made in the event of a triggering accident, and as such, it is not connected to any underlying infrastructure or physical assets. Therefore, it solves the ambiguity of physical verification for crop damage and settles claims based on a pre-defined trigger. This makes the whole process much faster, easier, and safer for the insured farmer.
For example, a farmer can take a parametric product insuring against rainfall exceeding 50mm for two consecutive days, an event that could result in abnormal crop health. A claim is instantly triggered if rainfall exceeds 50mm for two consecutive days in the insured geography. This claim is then transferred to the farmer’s bank account just within a few days of the policy term end date.
Let’s say a farmer has general crop insurance as well as parametric crop insurance as an added protection layer against the event of a flood. In case of flooding, under the parametric policy, the farmer will get a pre-determined payout instantly without any process. This would provide immediate financial help for farmers to cope with their loss. However, under general crop insurance, it would take much longer to assess the loss and settle the claim.
What all is Covered?
Furthermore, parametric covers can be customized based on the quantity of rainfall and temperature variations. Just under the rainfall category, various parametric policies can be purchased like unseasonal rainfall cover, cover for wet spells, excess rainfall cover, deficit rainfall cover, cover for inadequate distribution of rainfall, etc.
Advantages
- Coverage for events that were previously uninsurable
- Reduces gaps in farmer security in the global agri-food chain
- Increases the risk-taking ability of farmers
- Eliminates fraudulent claims
- No need to justify the claim
- No need for the claims settlement process
- Prompt pay-out to the farmers to help them recover quickly from an adverse event
- The metrics used are objective, transparent, and independently verifiable
- No restrictions on how the pay-out is used
Better technology & enhanced data processing models for premium vs payout calculations
Parametric is basically a plug & play version of crop insurance that is customisable, farmer-
friendly, and fully transparent.
India’s First DIY Parametric Insurance Platform
Upaj has partnered with DigiSafe to host India’s first Do-It-Yourself crop insurance and parametric insurance platform. On the platform, farmers will have the option to choose between multiple insurance products to secure themselves against the vagaries of nature at affordable prices.
To ensure transparency and safety, Upaj will give real-time weather updates to farmers to prepare them in advance for adverse events. It will also have a feature to tell farmers their estimated claim amount and the date by which they will receive it.
Along with crop insurance, farmers will also get complimentary access to the Upaj app. On the app, they can add their farms and get real-time updates about weather conditions and possible pest attacks. Through the app, even if they are away from the fields, farmers will be easily able to monitor their crop health through various parameters.
Promoting Resilient Food Systems
While climate change adversely affects the livelihoods of farmers in various ways, parametric crop insurance is an important tool that can help them combat and adapt to it. A single natural disaster can be volatile for farmers and this is one tool that promotes disaster resilience in our agri-food systems.
