---

It was not the first time Deviben’s wares got heat-damaged. It has been happening most years ever since Gujarat’s Ahmedabad city in May 2010 experienced an unprecedented week-long deadly heat wave spiking to 46.8°C. Deviben says she feels an unrelenting anxiety deep within her as summer approaches.

“For over a decade our income plummets, sickness stalks us through the hottest months.”

However, succour has arrived in India in the form of a newer kind of income protection insurance against extreme heat. A parametric microinsurance has informal sector self-employed women like Deviben covered, building their resilience to growing extreme heat in India.

Parametric insurance depends on one or a few predetermined indexes or parameters, and if these are triggered, a pre-agreed payout happens quickly, which is its attraction. The payout is regardless of the quantum of loss. This creates a much lower risk and time-effort for daily-wage-dependent insurance participants. Whereas traditional indemnity-based insurances necessitate a loss-assessing survey, taking months for compensation payout.

Parametric insurance beneficiaries often pay a small premium, which is subsidized in these initial stages, but group insurers like SEWA visualize beneficiaries realizing benefits and eventually paying.

“Livelihoods and incomes decrease by 30-50 percent due to decreased work efficiency, reduced work hours, increased raw material expenses, spoilage of goods, loss of customers, and reduced workdays due to heat-related illnesses,” according to Sahil Hebbar, Senior Coordinator in charge of the parametric micro-insurance pilot at Self-Employed Women’s Association (SEWA).

The World Meteorological Organization’s (WMO) just-released State of the Climate in Asia 2024 finds that in 2024, Asia’s average temperature was about 1.04°C above the 1991–2020 average, ranking as the warmest or second warmest year on record, depending on the (final) dataset.

WMO warns that the region is warming nearly twice as fast as the global average, driving more extreme weather and posing serious threats to lives, ecosystems, and economies. The 1991-2024 warming average trend has almost doubled from that of 1961-1990.

Extreme heat is one of the deadliest climate risks, responsible for almost half a million deaths per year globally, said Swiss RE one of the world’s leading providers of reinsurance. It partnered with SEWA’s group insurance in 2024.

Beyond the impacts on worker health and well-being, extreme heat can also cause a myriad of economic impacts. Globally, 675 billion hours are lost every year because of excessive heat and humidity, amounting to roughly 1.7% of global GDP, according to Swiss RE.

Women in informal employment face climate heat and exclusion

Around 90 percent of women workers participate in the informal employment sector in India. If they are unable to go out to work due to extreme heat conditions, they lose their daily wages. Overall, developing nations are the most exposed to the frequency of climate shocks and chronic onset of mainly extreme heat and floods. Women workers are the most impacted.

A workers’ union, SEWA members total 2.9 million informal sector women workers. Salt-pan workers, recyclers from ship-breaking yards, construction site workers, street vendors, farmers, street waste recyclers, head loaders and home-based workers are included as beneficiaries. These women survive from one day to another on daily wages averaging 150-450 rupees (USD 1.74 –  USD 5.22).

Deviben sells bangles, neck pieces and eardrops of brightly colored fiber material inset in crudely worked metal and gaudy wristwatches with Tissot or CK emblazoned on their dials.

“Because we all streetside sellers sit directly exposed to the sun, dehydration is common. Sometimes my head reels like a carnival merry-go-round; I can barely stand. I go under a tree shade but for only a short while, fearing I’d lose customers,” Deviben said.

When it is really bad, she buys a packet of Oral Dehydration Solution but cannot always afford the 20 rupees (US 0.23 cents) cost.

Hansaben Ahir, 49, a waste collector and recycler, has been a SEWA member for 15 years. She said dehydration, a resultant urinary tract infection, and sudden heat cramps in her legs are so painful, she just has to sit herself down, even if on a road. Last summer she also developed hypertension, mainly stressing over a rising-cost home loan and plummeting income.

“Late-March till the end of June almost every year, my daily earnings fall to 250 rupees (USD 2.90), just half of my normal income, because customer footfall drops drastically,” Deviben, the street vendor, said.

Out-of-pocket medical expenses for the entire family take a chunk from their meager savings. “The insurance payout helps us meet medical expenses,” she said.

Where traditional insurance hesitates, parametric climate insurance can spread its reach

While SEWA’s 2023 parametric heat insurance pilot was a non-starter, nevertheless, “It was a pilot, and we learned a lot of lessons,” Sahil Hebbar told IPS earlier when the parametric insurance failed to trigger any payout although 2023 was the second warmest on record in the country since 1901 according to the India Meteorological Department.

The single parameter that was considered for the 6-week pilot was satellite-determined maximum daytime temperature. Only when a consecutive 3-day average temperature topped 45-46 degrees Celsius would the women have seen a payout.

Hebbar said there is a difference between satellite-recorded temperature and that on the ground where SEWA women worked. Wet-bulb effect, that dangerous effect of heat combined with humidity that inhibits sweating to cool off the body, should be another parameter. So should high nighttime temperature, which is more harmful for health than daytime heat. Hebbar is also a consulting physician with SEWA.

The challenge, in this case of extreme temperatures, was that the perception of heat and its tolerance can be relative, with significant degrees of variation depending on the location (even within the same Indian province). Somehow local climate variations need to be reflected in the final design of the solution, according to Swiss RE which designed SEWA’s 2024 parametric insurance.

That year, with modifications to design, mainly using locale-by-locale historic temperature data, the parametric insurance was scaled up to 50,000 members across 22 districts in three provinces—Gujarat, Rajasthan, and Maharashtra—up from the pilot’s 21,000 members across just 5 districts in Gujarat alone.

From getting zero payout in 2023 because of the unrealistically high trigger of 45-46 degrees Celsius, in 2024, the insurance was triggered in 17 out of the 22 districts, and 46,339 SEWA members received payouts ranging from 151-1651 rupees (USD 1.75-USD 19).

In 2023 the climate adaptation equipment that the insurance beneficiaries got for the USD 3 premium they paid were umbrellas and cooler water flasks for urban workers, while rural workers got tarpaulin and solar lanterns. In the summer of 2024, these were replaced by a cash assistance layer that triggered in all 22 districts, and members received cash assistance of 400 rupees (USD 4.64).

The two-layered combination of insurance payouts and a direct cash assistance programme helps reduce marginalized women workers’ burden of income losses from climate events.

Similarly, another Gujarat women-centric non-profit, Mahila Housing Trust (MHT), has also, in 2024 introduced parametric heat insurance as a financial safety net for urban poor communities vulnerable to extreme heat.

However, parametric insurance is now also bailing out extreme monsoon victims, and this time not non-profits but a provincial government itself, the first in India, has disaster-insured the entire State of Nagaland in India’s northeast.

Nagaland’s annual rainfall averages between 70 and 100 inches, concentrated over May to September. However, torrential rainfall squeezed into just a few days can cause havoc, triggering landslides and home and crop damage in the mountainous topography.

The pre-agreed payouts here are based on high, medium, or low flood risk zones. The parametric monsoon coverage by the Nagaland State Disaster Management Authority (NSDMA) is provided under the Disaster Risk Transfer Parametric Insurance Solution (DRTPS). It saw its first successful payout in May this year for damages during the monsoons of 2024.

However, the new insurance may not be the panacea it’s being visualized to be. A section of policy experts and climate activists questions the long-term sustainability of parametric insurance.

Such mechanisms nudge governments to abdicate responsibility, providing social safeguards

“In the face of escalating climate impacts, the notion that insurance can serve as a panacea is not only misguided but dangerous. As climate impacts grow more severe, large areas of our planet are becoming impossible to insure. This means that the safety net of insurance is disappearing, even in the most developed parts of the world. Moreover, the structure of parametric insurance, which disburses funds based on predetermined triggers rather than actual losses, starkly fails those in dire need, often leaving them with a fraction of what is required to rebuild their lives,” climate activist Harjeet Singh told IPS.

“Such mechanisms not only deepen existing inequalities but also perilously nudge governments towards abdicating their duty to provide essential social safeguards. These very protections are vital for communities to rebuild their livelihoods and homes after disasters,” Singh, a lead campaigner for the United Nations’s Loss and Damage movement, added.

“We must pivot towards social protection mechanisms, such as unconditional cash transfers post-disaster, subsidized food grains, guaranteed wage employment for the able-bodied, and financial support for reconstructing homes, livelihoods, and ecosystem restoration. These not only assist in immediate recovery but also strike at the heart of vulnerability, fostering a resilient recovery from the climate-induced devastation,” he said.

“This is not merely a matter of policy preference but a fundamental human right for communities on the front line of the climate crisis. Robust social protection is required for genuine resilience and a fairer, more equitable response to the climate emergency,” he asserted.

Note: This feature is published with the support of Open Society Foundations.

PS UN Bureau Report

  Source