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What is Weather Insurance?

Weather Insurance

Insurance has peeped into every aspect of a human life and squeezed out any loss arising out of uncertainty, risk. Health can be managed, life can be sage guarded, accidents can be reduced, but can one control the weather? It is such a pure risk that can effect a very large population. Indian economy considered as agrarian economy derives 27% in GDP from agriculture.

The situation at present is that because of less availability of capital, farmers look for weather as the most essential part of cultivation. Due to inappropriate and untimely rainfall, the productivity reduces. Rapid urbanization attracts farmers to migrate to cities. Thus, farmers migrate and agriculture reduces. Not only are the farmers affected by it but the corporations too fear the weather. Weather affects the sale and also many outdoor events organised by the company. Weather insurance serves the needs of all such stakeholders.

Weather insurers for farmers

Orange crop in Jhalawar, Rajasthan; groundnut, castor and cotton crops in Andhra Pradesh and many other crops are very sensitive to rainfall pattern. The loss can sum up to 20 million. But the farmers are not tensed. They have a fully insured crop under weather insurance. Weather insurance provides compensation to the farmers facing loss due to the uncertainty in the covered peril.

Highlights of the cover are:

  • Peril identification: The agronomic properties of crops determine the perils which can affect the economic importance of the crop and up to what extent.
  • Index setting: It requires the comparison of the impact of time period and weather condition on the growth of the crop. Claims are settled on this basis only.
  • Claims processing: The beneficiary needs not to file a claim to get a payout. The beneficiaries are compensated at the end of every crop season insured. The decision of the claim amount is on the basis of market growth, local weather report and set index.

Thus a farmer who is illiterate just need to know that the crop is insured. Rest all formalities are completed by the insurance company.

Weather insurance for corporations

Weather effect the life of every single individual. But, if you are a firm and you have organised a event, involving huge gathering, decorations, artists and even stars, you need to spend a huge amount of money. And if it starts to rain? I think you have got the idea. Your tickets will not sell and you will face a huge loss.

Weather insurance for corporation involves two insurable covers.

  • Weather cancellation insurance: it covers any loss arising due to the cancellation of the event due to bad weather. Concerts, events, tournaments, award function, all can be covered under this insurance cover. These events require investments for planning, organizing, marketing and operation.
  • Conditional weather insurance: this is a new cover, which allows companies to launch promotional sales offers based on weather. These are used to drive up the sales which went low due to improper weather conditions. All the publicity, advertising expenses are covered.
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Shubham Mishra is an Actuarial Analyst at Mercer Consulting Services India Ltd. Being an actuarial science graduate, he has a very deep knowledge about each and every aspect of insurance market. He has published a few research papers on insurance topics in the magazines of reputed insurance institutions.


  1. Weather insurance is a new concept and it is helpful for many especially to those in the agrarian sector. But my concern is that if weather insurance is at all a feasible solution. I feel that with the emerging growth of numerous insurers it might be another way to collect some money from the people.

  2. Weather insurance is an assurance that covers the damage and loss that arise because of abnormal climatic conditions such as excessive rainfall, snowfall, fog, storms, shortage of rainfall and so on. Apart from being used in the agricultural sector, weather insurance is also used to insure expensive events, such as weddings and film shoots against weather.

  3. Thanks a lot for this article! I strongly feel government should provide weather insurance to farmers before the crops are sown rather then provide subsidies after the damage is done. The impact will be very positive on their lives and the tragedies will be reduced drastically. The surprising element is despite the farmer issues which is hovering around for so many years, not a single company has come forward to publicize these insurance policies. Its high time government start paying attention to it!

  4. A new concept in banking. I agree with the first line of the article that-“Insurance has peeped into every aspect of a human life and squeezed out any loss arising out of uncertainty, risk”. None of the issue has been left untouched by banking. Probably this concept should be formulated as this can lessen the suicide cases of farmers arising in our nation daily.

  5. Weather insurance – is there anything insurance companies haven’t capitalised on? Hahaha 🙂 Given that farmer suicide is so high, then the agrarian economy and individual farmers can be protected by this type of insurance. Maybe capitalisation is good in some circumstances as it can provide peace of mind for everybody, but it always just results in more money for banks and insurance agencies…

    • The way I understand the growth of the economy is that for an economy to grow exponentially, the macro economics must focus on increasing the public earning rather that decreasing public expenditure. Because your expenditure is income for someone else and the same applies otherwise.

  6. Wow…A total new concept, i did not even know something like this exists. I completely liked the idea of Weather insurance for Farmers, this can really benefit them, knowing that the weather conditions keep on changing in different parts of India. Glad to know that we are thinking about the agrarian sector, as i feel this sector is always talked about, but untouched on.

  7. Weather insurance for the farmers is a real noble concept specially in the light of the suicide by the farmers. The government should pay more attention to these ideas. Insurance even for the events involving large scale money like tournaments, award functions and concerts. Even insurance for promotional sales involving weather is really laudable.


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