Digit Insurance disburses parametric claims to Noida migrant workers as heatwave hits 42°C

Go Digit General Insurance (Digit Insurance), a leading digital full stack insurance company, has announced that it has settled claims for migrant labourers in Noida under parametric insurance as temperature in the city breached the threshold of 42°C (Celsius), triggering the first pay out.

The threshold temperature for each city has been set differently and is in the range of 42°C-43.7°C. The claim payouts are structured into two tiers, the company said. The first payout automatically kicks in if the temperature of a specific city crosses the threshold for five consecutive days, it said. “If the temperature exceeds the threshold for ten consecutive days, the exit strike will kick in, leading to an additional payout,” Go Digit said.

Benefits for migrant labourers

Under the ‘Digit Parametric Insurance’ policy, the insured migrant labourers will be paid up to ₹ 3000, allowing them to protect their health and afford daily necessities. The parametric cover also comes along with a hospitalisation cash allowance of up to ₹ 5000 in case of any accidental bodily injury or illness. The allowance is applicable even if no temperature breach has occurred and applies to any type of hospitalisation, ensuring additional support to workers during extreme weather conditions.

Bajaj Allianz General Insurance recently launched ‘Climate Safe’, which is also a parametric insurance policy wherein pay outs are triggered when certain specified parameters are met. It covers increased living costs due to extreme weather.

ICICI Lombard, in collaboration with Swiss Re, launched the first parametric-based weather insurance in the country, covering ‘High Heat’ events to women labourers associated with ‘Self Employed Women’s Association (SEWA)’ in Gujarat, Rajasthan and Maharashtra in May 2023.

Go Digit Insurance has partnered with K.M. Dastur Reinsurance Brokers (KMD) and Jan Sahas Foundation to offer heat index-based parametric insurance to migrant labourers across Delhi, Noida, Ghaziabad, Gurgaon, Faridabad, and Lucknow.

“Many migrant labourers rely on their daily wages and work under extreme heat conditions during peak summers exposing them to severe heatstroke, which can also be life threatening. In 2024, India reported 67637 cases of suspected heatstroke and 374 deaths,” Go Digit Insurance said.

How parametric insurance works

Unlike traditional insurance, which requires loss assessment, parametric insurance triggers immediate pay outs when predefined thresholds are breached. The pay out is triggered by a specified parameter that is described as a strike point. The strike point is defined as the moment when the insured weather parameter (measured in milli meters of rainfall or degrees of temperature) exceeds the predefined threshold specified in the policy.

If this strike point is reached within the policy period, a proportionate percentage of the sum insured is paid to the policyholder. The policy also has something called the exit point that is triggered when the thresholds are breached for several consecutive days. A higher pay out is made when the exit point is reached. The strike and exit points are unique to each policy, depending on the selected risk, risk location, and risk period.

“Digit's heatwave parametric insurance is a crucial step in providing migrant labourers with a much-needed safety net, ensuring their financial resilience amidst extreme heat,” said Adarsh Agarwal, chief actuary and product officer, Digit Insurance. “The timely pay out in Noida reaffirms parametric insurance has the potential to address many environmental challenges,” he stated.

“So, while there is parametric insurance to provide transparent, timely support when the mercury consistently crosses a defined threshold, the migrant labourers also have a defined benefit hospital cash cover for their heat-related illnesses running parallelly without any triggers,” said Ayandev Saha, Executive Vice President, K.M. Dastur Reinsurance Brokers. 

“We feel especially positive about this heat stress cover since it brings complementarity between the benefits of traditional and parametric insurance,” he said.

The premium for this cover, on behalf of the identified migrant labourers, is being borne by Jan Sahas Foundation. “Parametric insurance has significant potential to strengthen the financial resilience of informal workers against income and health shocks caused by climate-related events,” said Rajpal Panwar, Director, Jan Sahas Foundation.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.