Parametric Insurance
Get Paid Fast When The Trigger Hits
Traditional policies pay after a surveyor has measured your loss, which can take months. Parametric insurance works differently: you agree an index, such as rainfall, temperature, wind speed or earthquake intensity, and a payout scale in advance. When independent data shows the trigger has been crossed, the claim is paid quickly, without a loss adjustment. MILES helps businesses identify the weather and catastrophe risks that hurt their revenue and design triggers that track those losses closely.
Why Businesses Use Parametric Cover
Fast Payouts
Claims are settled on published data, so money can arrive in days or weeks rather than after a lengthy survey.
Covers Non-Physical Loss
Pays for lost revenue or extra costs even when nothing is physically damaged, such as a washed-out season.
Transparent Triggers
Trigger, data source and payout scale are fixed in the policy, so both sides know the outcome in advance.
Flexible Use Of Funds
The payout is not tied to repair invoices, so it can fund wages, loan repayments or emergency operations.
Fills Deductible Gaps
Works alongside property and business interruption policies to cover large deductibles, sub-limits and exclusions.
Location-Specific Design
Triggers are tied to your sites or sourcing regions using weather stations, satellite data or seismic readings.
What is parametric insurance?
Parametric insurance is a policy that pays a pre-agreed amount when a measurable event crosses a set threshold, such as rainfall above a level in a given period or an earthquake above a set magnitude near your site. The payout depends on the index reading, not on an assessment of the actual damage you suffered.
Because it removes the loss survey, it is fast and predictable. It is one of the more innovative products on our specialty insurance list and is increasingly used in India for weather, agriculture, renewable energy and disaster risk.
How it works
Every parametric policy has three building blocks:
- The index — the measured parameter, for example cumulative rainfall, number of rainy days, maximum temperature, wind speed, cyclone track or earthquake magnitude.
- The data source — an independent, reliable source such as a government weather agency, a specified weather station, satellite data or a seismic network.
- The payout structure — a trigger point at which payment starts, and either a fixed sum or a sliding scale up to a maximum (the exit point).
For example, a hotel in a coastal town could agree that if a specific data source records rainfall above an agreed level over a peak weekend, a fixed amount is paid for each such weekend. The hotel does not need to prove cancellations; the data decides.
What it can cover
| Risk | Typical index | Who uses it |
|---|---|---|
| Excess or deficit rainfall | Rainfall in mm over a period | Agri-businesses, cement, construction, outdoor events, beverages |
| Heatwaves | Days above a temperature | Dairies, poultry, power distributors, outdoor workforces |
| Cyclone | Storm category and distance from site | Ports, coastal plants, resorts, salt pans |
| Earthquake | Magnitude and distance, or ground shaking | Factories, data centres, housing projects |
| Low wind or sunshine | Wind speed or solar irradiance | Renewable energy producers |
What is not covered
- Loss when the index does not cross the trigger, even if your business was affected. This is called basis risk.
- Events at locations or in periods not named in the policy.
- Risks without a reliable, independent data source.
- Losses you want to recover to the exact rupee; parametric pays the agreed amount, which may be more or less than the actual loss.
Who needs it
Parametric cover suits businesses whose earnings depend on weather or whose property policies leave large gaps. Examples include agricultural value chains and food processors, construction contractors working through the monsoon, renewable energy companies, hospitality and event businesses, logistics firms in cyclone-prone regions, and lenders or microfinance institutions protecting borrowers. It also appeals to companies that want quick cash after a catastrophe, before the traditional property insurance claim is settled.
How the premium is decided
The price comes from historical data. Insurers and reinsurers model how often the trigger would have been hit over many past years and how much would have been paid. A trigger that is hit often costs more. A lower maximum payout, a higher trigger or a narrower risk period reduces the premium. Pricing therefore depends on the quality and length of the data available for your locations, and it varies by insurer.
What we need for a quote
- The event you want to protect against and why it causes financial loss.
- Exact locations or regions, with coordinates if possible.
- The months or season at risk.
- Historical records of how that event affected revenue, costs or output.
- The payout amount you would need in a bad year.
- Details of existing property and business interruption policies.
How MILES helps
- We translate your business losses into an index and trigger that follow them as closely as possible, reducing basis risk.
- We approach insurers who offer parametric solutions and compare trigger design, data sources and pricing.
- We check that the policy fits with your existing property and business interruption covers.
- We explain in plain terms how the payout will be calculated before you sign.
- During the policy we monitor the index with you and help lodge the claim once the trigger is reached.
Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.