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The impact of climate change on insurance

change on insurance

Extreme weather conditions are never quite favourable to mankind and eventually result in hefty losses that become extremely difficult to manage. It can be a jolting earthquake, fiery draught, or torrential rainfall resulting in floods, landslides, typhoons, wildfires, cyclones, and many more.

One of the most significant drawbacks of such conditions is that they are essentially unpredictable. You never get much time to prepare yourself to combat such calamities and catastrophes. But, it is assured that you will encounter losses to a certain extent.

Indian insurance sector on climate change

The changing climate is now a bitter reality for Indian insurance companies, far beyond textual theories. 

The massive loss of homes and properties due to a major landslide in the Joshimath region of Uttarakhand triggered the question of whether any insurance will cover such losses. 

Expert environmentalists attribute the causes for such occurrences lies in activities like massive deforestation, reckless construction leading to environmental damage, dam building, road widening, covering waterbodies for construction, extreme pollution from transports, industrial wastes, etc. 

Such activities majorly affect the environments of urban cities too. For example, the poor air quality in Delhi is worsening with every passing day, directly impacting your health and eventually your life expectancy. 

Preparation and coverage

One of the best ways to cope with such situations is to keep yourself amply covered beforehand. If you are living in a danger-prone region which is frequently affected by natural calamities, you must maintain adequate insurance coverage to cover all grounds safely. 

In case you are investing in a health plan, you must aptly supplement it with a critical illness cover to ensure enhanced cover and protection. Any cancer treatment is long-lasting and quite expensive. This approach will help you to manage your finances well. 

Pros and cons of the insurance sector for handling the implications of climate changes

Coping with the implications of the changing climate still needs a significant way to go for the insurance industry in the country. It carries both advantages and disadvantages. 

One of the most significant pros is that insurance providers must significantly quantify their pricing under such circumstances of climate change. At present, irrespective of your location, you are charged an identical amount of premium for a particular life insurance plan. For any commercial property insurance cover, you are charged an equivalent premium for both Cherapunji and Rajasthan. 

This implies that the costs related to the Air Quality Index still remain quite below the radar. 

In this context, we must mention two major disadvantages. One of them is that you still remain devoid of unique innovative insurance products that can effectively help you in mitigating the associated risks. The other con is that the advantage of advocacy is foregone which the insurance providers effectively implement and practice. 

If you charge a differential premium depending on the micro-geographical situations, it will eventually enhance the overall consciousness of the society for a better appreciation of risks and taking proper steps to manage the situation. 


Although the insurance sector can handle climatic changes to a certain extent, it can never be a permanent solution, unless society effectively implements ecologically sensitive measures to reduce the pace of climate change.

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