Parametric microinsurance products becoming more accurate: study

By Henry Gale

March 4 - (The Insurer) - A wide range of indices are now available for parametric agriculture microinsurance products, which are becoming more accurate over time, according to the Landscape of Microinsurance 2024 report.

The report, published by the Microinsurance Network (MiN) on Thursday, reviewed 985 insurance products provided across 37 countries in 2023. Of the 83 products reported on for crops, livestock and fishing, 43 were parametric. MiN's previous report found 40 parametric covers among the 77 agriculture microinsurance products available in 2022.

In total, agriculture microinsurance products reached 42.5 million people, including 37.5 million insured under India's national crop insurance scheme. 58% of agriculture microinsurance products are subsidised, the study found, with unsubsidised products covering just around 400,000 people.

Parametric covers, which are often referred to as index insurance in a microinsurance context, were also one of the topics at the forefront of regulators' minds, the study said.

"Insurance regulators and supervisors are experiencing increasing pressure to act in relation to climate-related risk," the study said. "Index insurance is often used to address climate risks, but most countries do not yet have clear regulation in place for index insurance. Many regulators, therefore, are interested in developing specific regulation for index insurance."

An expansion of coverage for climate risks was a key finding of the report, with climate-linked covers being introduced for property and health risks as well as agriculture. Several parametric microinsurance products have been introduced beyond agriculture in recent years, including for income losses when heatwaves and pollution make it unsafe to work. The report did not specify how many microinsurance covers outside agriculture were parametric.