WEATHER INSURANCE: INSURING AGAINST MOTHER NATURE
What Is Weather Insurance?
Weather insurance is a type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable temperatures or other adverse, measurable weather conditions. Weather insurance is used to insure an expensive event that could be ruined by bad weather, like an outdoor wedding or an outdoor film production. In short, weather insurance insures against weather variations.
TYPES of Weather Insurance
There are two insurable types of weather insurance: weather cancellation insurance and conditional weather insurance.
- WEATHER CANCELLATION INSURANCE: Weather cancellation insurance reduces an organization’s risk in planning an outdoor event. When an organization is having some form of outdoor activity and the weather prevents that activity from taking place, the organization risks losing whatever money that has been invested in organizing the event. Weather cancellation insurance ensures that if inclement weather does occur, the organization will not lose their investment. Instead, an insurance company will cover those costs based on the size and type of the weather cancellation insurance purchased.
- CONDITIONAL WEATHER INSURANCE: Conditional weather insurance gives companies the ability to make promotional sales offers based on the weather; this form of insurance used by businesses to increase publicity and drive sales. For example, a furniture store might advertise that all buyers of furniture in the month of December will get their purchases free if it snows more than 2 inches on Christmas day. The store buys a policy to cover this specific event.
HOW is Weather Insurance rated?
Insurance companies rate weather insurance based on the weather peril date, the location of the event (city and state) and history of the weather peril that is being underwritten (temperature, rain, snow, etc.) as well as the size of the policy that is being insured.
Weather Insurance in India
In India, ICICI Lombard is the most popular company in the field of weather insurance. Weather insurance was developed in association with the World Bank. It was launched as a pilot scheme which was first used to insure groundnuts in Andhra Pradesh.
Author: Ratna Somaiya
Note: This article was originally posted on LinkedIn, we are sharing this with the consent of author.