India's insurance gap can amount to billions when it comes to counting the costs of extreme weather events, according to Mr Tapan Singhel, managing director and CEO of Bajaj Allianz General Insurance, and Mr Daniel Murphy, Industry Communities specialist at World Economic Forum (WEF).
In a blog posted on the WEF website, the writers discuss climate resilience and income protection in India.
India has seen unparalleled growth and development in recent decades but risks losing ground due to heightened exposure to climate perils including heat waves, floods, and earthquakes.
The impact of extreme climate events in India touches on nearly every aspect of its economy and society but is more pronounced in particularly exposed sectors such as agriculture, which comprises 15% of India’s GDP and employs around 40% of its population – 70% among its rural households.
Between 2015 and 2021, India lost 33.9m hectares of crops due to excess rains and an additional 35m hectares due to drought. Several Indian sectors including agriculture suffered $159bn in economic losses in 2021 due to lost working hours from extreme climate impacts. By 2030, India is projected to see a substantial 5.8% decline in working hours – equivalent to 34m full-time jobs – due to heat stress.
Indications of the insurance gap in India are as follows:
|
Year
|
Natural disaster
|
Economic loss $
|
Insured loss $
|
Insurance gap $
|
|
2020
|
Cyclone Amphan
|
13.0 bn
|
1,500 m
|
11,500 m
|
|
2021
|
Cyclone Yaas
|
2.5 bn
|
200 m
|
2,300 m
|
|
2021
|
Tamil Nadu floods
|
1.0 bn
|
100 m
|
900 m
|
|
2022
|
Assam floods
|
3.0 bn
|
300 m
|
2,700 m
|
|
2023
|
Himachal Pradesh floods and landslides
|
1.5 bn
|
150 m
|
1,350 m
|
|
Source: World Economic Forum
|
Building climate resilience
To address the insurance gap challenge, the country’s government agencies and business leaders are working on a number of effective sector-specific local and national strategies. Three of the strategies for building climate resilience at scale that are being implemented in India are:
1. A digital insurance platform for farmers
India’s Minister of Agriculture recently launched the Sandbox for Agricultural and Rural Security, Technology and Insurance (SARATHI) to provide a comprehensive suite of insurance products for farmers in rural India. This user-friendly digital platform will simplify the process for farmers to view and purchase insurance.
2. Innovative income replacement insurance for women
The Women’s Climate Shock Insurance and Livelihoods initiative (WCS) recently established a first-of-its-kind income replacement product so female outdoor workers aren’t forced to work during extreme heat waves.
During a record-breaking heatwave this year, the product paid out to more than 46,000 female outdoor workers, replacing the income they would have lost due to their inability to safely work amid extreme temperatures. The programme includes an early warning system that provides guidance for specific communities. This product is already being introduced to other at-risk communities in India and beyond.
3. Pioneering heat action plans
India was the first country in South Asia to create a heat action plan after an extreme heat wave in the city of Ahmedabad in 2010 resulted in a 43% increase in mortality compared with the same period in previous years. The plan includes a system to alert residents when dangerous heat waves are expected and provides cooling centres. It also educates healthcare workers about how to recognise and treat heat-related illnesses. A study of the impact of this programme has shown it saves around 1,190 lives per year.
Insurers could work more closely with policy-makers and government officials to use the industry’s leading risk analytics, predictive tools, and climate data to inform more heat action plans and direct capital towards high-impact adaptation interventions.