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The floods that devastated parts of southeast Australia last month revealed, yet again, this nation’s growing insurance problem. The assessment of the damage was painfully slow. Increasing premiumsMany victims were left without insurance.
The disaster was part of a global trend towards localised, sudden and intense weather known in the insurance industry as “secondary perils”. These events These includeThunderstorms, hailstorms, bushfires or flash floods can be less severe than single large catastrophes like a major earthquake or cyclone.
But they can happen frequently – and still leave a big damage bill and displace thousands of people.
Australia is one of the most populous countries in the world. most exposedThe world is subject to extreme weather events caused by climate change. We need to seriously think about how to manage secondary perils’ financial risks.
A new type of cover known as “Weather index insurance” may be a piece of the puzzle. Automatic payments are used to make the process simpler for victims and insurers. It’s been deployed as far afield as remote parts of Paraguay and Mongolia – and could work for Australia, too.
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What is weather insurance?
Traditional insurance is based on the damage caused by an incident. Many times, disaster victims will need to make detailed inventories of all the damage or loss before they can file a claim. People can wait for months or even years to receive their money due to the sheer volume of claims.
Weather index insurance, often referred to as weather insurance is paid. When an indexis reached, such a flood level. A payment can also be made to farmers who are in drought.
The insurance is being trialled around the world – most commonly, among farmers in remote parts of developing countries.
Insurance assessors may find it difficult to travel long distances to the extreme weather event. Steppes in MongoliaOr Floodplains of BangladeshAssess the farm damage.
Satellites and remote sensing technologies can be used to inform an insurance company if extreme weather has occurred.
The payments are quick and automatic. Once a weather event has been recorded, the policyholder will be paid.
The payment occurs regardless of whether a farmer’s crop survives. This is how you get the best out of your life. the farmer an incentive to make the best decisions to ensure the crop doesn’t fail. The farmer still gets the crop revenue and the insurance payout if the crop survives.
Insurers believe weather insurance will allow them to expand their markets into remote areas.
The weather index is This article is linked toSpecific crops and their growing circumstances. The insurance company can then predict the loss.
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Victims of floods in Queensland and NSW have filed 60,000 claims. However, too many people are not insured. Here’s an alternative:
Dave Hunt/AAP
Promising results from global trials
Farmers can be made poorer by having insurance More creditworthythereby increasing their access for loans.
In EthiopiaA successful weather index insurance program was found to have been a benefit to farmers. Speedy payouts meant policyholders didn’t have to sell valuable livestock to cope with a disaster. In some cases farmers reinvested insurance payments in their herds.
Research is an important part of Australia. SupportThe viability of weather index insurance. It was RecentlyAlthough it was first introduced to a small group of farmers, it has yet to be widely adopted.
Australian insurance companies also offer weather policies abroad. CelsiusProFor example, he has worked with the World Bank, and other aid organizations to bring such insurance to Communities in the Pacific
Continue reading:
After the floods, we need better insurance.
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A word of caution
Weather index insurance does not guarantee success and should not be considered a miracle cure.
The weather index is a measure of the growth conditions for a particular plant. This can lock farmers into specialising in a single crop – exposing them to new risks such as volatile market prices, and scuttling their diversification strategies.
Also, payouts are not guaranteed. During an El Niño year in Paraguay, sesame farmers suffered flooding and then drought. But the conditions fell just short of the index in most areas and those farmers didn’t get a payout.
What’s more, the data gathered by insurers may not match what’s actually happening on the ground. For example, research in sub-Saharan Africa found that a sizeable gapBetween weather and environmental indices measured using remote sensing and the experience and knowledge of policyholders.
It is often necessary to improve data and monitor frequently. Investing – from both governments and insurers – in infrastructure and technology such as weather stations, climate models and communications systems.
ParaguayThe burden of collecting good weather data has been borne largely by local communities. They maintain meteorological equipment, provide valuable feedback on the ground, and contribute to crop science. However, they are often not compensated.
Even more difficult is coping with weather catastrophes in developing countries. Collective effort. Individual insurance policies can exacerbate inequalities or erode a community’s response.
Finally, high premiums combined with low trust from the farmers are a problem. Limited uptakeCurrently, there are no weather insurance policies.
This means that even weather insurance is unlikely to provide a safety net against severe weather risks.
CHIEN-MIN CHUNG/AP
What’s next?
More than 70% of global insured losses due to disasters in 2020 were due to secondary perils
They also included the Black Summer bushfires of Australia and a Freak hailstormCanberra was the worst hit, with damage estimated at A$1.65billion.
Property insurance has yet to test weather indexed insurance. The agonizing wait for a payout after the recent floods of southeast Australia has led to bold new solutions.
Research has also shown merit in weather insurance at a Regional or national scale.
Australia’s high exposure to extreme weather should mean all insurance options are on the table – especially those that are inclusive and don’t relegate high-risk communities to the outcast pool of “uninsurables”.
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