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.