Emergence of Parametric Insurance

The event, or parameter," is often indicated by an established and authoritative index for that type of event, such as the Richter scale for earthquake intensity or the Saffir-Simpson scale for hurricanes or Knot i.e., nautical mile per hour for storm.

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Insurance is an intangible product. It has always been a tough product to manufacture underwrite) and more tough to sell. But there is a glimmer of change on the horizon, in the form of Parametric Insurance.

Recently, Mr. Debasish Panda, Chairman, IRDAI while speaking at 16th Health Insurance Summit 2022 in New Delhi suggested bringing more parametric insurance products in the Indian Market which has created much excitement.

What is Parametric Insurance:

Parametric Insurance is an agreement under which an entity assuming risk the insurer") agrees to pay the indemnitee the insured") an agreed amount upon the occurrence of a specified event, such as an earthquake or hurricane or storm of specified intensity. The event, or parameter," is often indicated by an established and authoritative index for that type of event, such as the Richter scale for earthquake intensity or the Saffir-Simpson scale for hurricanes or Knot i.e., nautical mile per hour for storm. For that reason, parametric coverage is also called index-based insurance."