Parametric Insurance for Climate Risks: Ft New India Assurance

The New India Assurance Co. Ltd., India’s largest public-sector general insurer (non-life insurer), is set to launch parametric insurance products aimed at protecting farmers against climate risks. The company’s CMD confirmed this during a recent Group of Ministers (GoM) meeting, where a GST reduction on insurance premiums was also discussed.

A general insurer launching parametric insurance marks a shift in how it approaches risk coverage, because such insurance works differently from traditional indemnity-based insurance. Could this be a subtle hint that the insurer is exploring more non-indemnity insurance policies? Well, that is not confirmed yet. But here’s what we know for sure:

While New India Assurance does their innovative bit towards securing farmers against climatic hurdles, wouldn't you want a more comprehensive policy that offers an umbrella financial coverage and will kick in during health crisis and fatalities? If that's the case, feel free to book a call/WhatsApp Us with one of our insurance experts. No spam, no misselling, just honest insurance advice.

New India Assurance to Launch Parametric Insurance for Climate Risks

The New India Assurance Co. Ltd. is a government-owned general insurance company among the few Indian insurers operating globally. New India Assurance has traditionally offered indemnity-based general insurance products like health, motor, and fire insurance. Entering the parametric insurance space marks a major strategic shift, especially for a company that has long been rooted in conventional policy models.

While the exact launch date and product structure have yet to be revealed, the move signals a major step by New India Assurance into diverse sectors. But before we talk about this, let’s understand parametric insurance.

Parametric vs Non-Parametric Insurance

Traditional insurance pays you based on the damage incurred to your car, home, or health. This is called indemnity insurance, which relies on surveys, loss assessments, and paperwork. Parametric insurance, on the other hand, flips that logic. The term “parametric” comes from “parameter”, which is a measurable trigger or condition.  It doesn’t care how much damage you faced. It cares about what happened. 

Here’s how it works: Let’s take crop insurance, for instance. There’s a pre-defined event (like 100 mm of daily rainfall). If that happens, the insurer pays you a pre-agreed amount — no need to show the damage or loss. The logic is simple: if this event occurs, you're probably affected, so here’s your payout.

In India, where climate events like floods, droughts, and windstorms have become more frequent, this coverage could offer timely relief to vulnerable groups such as farmers, who rely on this crop for their livelihoods.

New India’s Play in the Parametric Space

CMD Girija Subramanian confirmed that the company has received regulatory approval from IRDAI under the “use and file” category — meaning, the insurer can launch the product without waiting for prior approval. It’s ready, registered, and set to go live by the end of this month.

The coverage? Events like excessive rainfall, floods, high-velocity winds, and droughts. And while parametric insurance is often associated with agriculture or large-scale infrastructure, Subramanian clarified that this product is open to retail and business customers.

She emphasized that the payout will be tied to publicly available data — say, rainfall thresholds published by the Indian Meteorological Department (IMD). Once the trigger is hit, claims get settled automatically, like a smart contract (although we are unsure if they’re using blockchain, at the moment).

Global Demand for Parametric Insurance

Parametric insurance is not a concept only in India, and it’s not just for crops. Here are a few other instances in the world where parametric insurance has been in use:

1) Caribbean Catastrophe Risk Insurance Facility (CCRIF)

Where: Caribbean and Central America

Trigger: Earthquakes, hurricanes, and excess rainfall

How it works: If a hurricane hits a specific wind speed or pressure level near a member country, a payout is automatically released to that government—even before damage is fully assessed.

Impact: Small island nations can access emergency funds quickly for disaster relief.

2) Africa Risk Capacity (ARC)

Where: African Union member states

Trigger: Rainfall deficits, drought, and crop failure using satellite rainfall data

Use case: If rainfall falls below a certain threshold during planting season, governments receive funds for food aid, seeds, and fertilizer distribution.

Impact: Enables early intervention before a humanitarian crisis escalates.

3) Swiss Re & World Bank Parametric Insurance for Peru

Where: Peru

Trigger: Earthquake of magnitude ≥ 7.0 near Lima

Payout: Funds are released to the Peruvian government to cover post-disaster reconstruction.

Benefit: Bypasses bureaucracy and allows faster rebuilding.

But Here’s an Interesting Thought: Why does a general insurance company want to foray into parametric insurance?

New India Assurance is a general insurance company that offers indemnity-based policies like health, motor, and travel insurance. Parametric insurance, by contrast, is non-indemnity. The payout isn't about the actual financial loss — it’s about event occurrence.

So, what gives?

Is this a one-off product for climate resilience? Could New India Assurance be experimenting with non-indemnity products more broadly, maybe even tiptoeing into territory usually reserved for life insurance companies?

We’re not saying they’ll pivot just yet. But if a general insurer is willing to explore non-indemnity insurance, it raises questions about how the insurance ecosystem in India might evolve soon.

Government Support for Parametric Innovation

Though parametric insurance is still early in India, existing government frameworks could support its evolution. The Pradhan Mantri Fasal Bima Yojana (PMFBY) already collects rich agro-meteorological data, which could serve as a launchpad for parametric schemes.

Moreover, state-level programs — such as Nagaland’s rainfall-triggered insurance — are experimenting with local adaptations of parametric models, signaling a willingness at both central and regional levels to rethink how insurance works for farmers.

A Quick Look at New India Assurance’s Metrics

Here’s how the insurer has performed over the past few years:

Note: These metrics are primarily for their health, travel, motor, and other indemnity-based insurance policies. While this does not compare apples to apples, we hope this will give you an understanding of how the insurer operates overall.

While the company boasts a strong claim settlement record and widespread agent distribution network, it has a very high incurred claim ratio and too few network hospitals. This means that the insurer is settling more claims than it is receiving in premiums, which is certainly not a good sign.

In the March 2025 quarter, New India Assurance posted a net profit of ₹347 crore, down 2% from ₹354 crore in the same period last year (possibly because of the higher incurred claim ratio). Annual profits also slipped 12.49% from ₹1,129 crore to ₹988 crore in FY25. However, the insurer’s total income saw a slight uptick, crossing ₹10,966 crore in Q4FY25.

So, in some sense, this product launch might also be part of a broader effort to diversify offerings and explore new growth channels.

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Final Thoughts

The entry of the New India Assurance into the parametric space could mark a pivotal moment. As climate risks intensify, demand for timely, transparent, and reliable insurance products will only grow. Parametric insurance, when designed well, has the potential to meet this need.

Other insurers, such as Bajaj Allianz, have already done this. Whether this becomes a blueprint for others or remains a niche experiment remains to be seen. But either way, it’s a timely innovation in an industry where speed, certainty, and simplicity are often in short supply.

And who knows — maybe the next wave of insurance products won’t look like what we’re used to.