Arooj Zulfiqar

Parametric insurance could provide farmers with faster relief when they lose their crops to flooding, storms, and other climate-related disasters. “Farmers face numerous challenges, including unpredictable weather patterns, crop diseases, and price fluctuations. These uncertainties can have devastating consequences on their livelihoods and the stability of the agricultural industry as a whole. To mitigate these risks and support farmers, the establishment of a parametric insurance pool for agriculture will prove a game-changer,” said Faiz Rasool, Senior Policy Adviser at Global Alliance for Improved Nutrition (GAIN), a Geneva-based non-profit foundation. “Parametric insurance is an innovative solution that can provide farmers with faster relief when their crops are damaged by climate-related disasters like floods and storms.

The impact of climate change, including heat waves, erratic rainfall, and flooding, has had a devastating effect on Pakistan's agriculture. In response, the government needs to consider the implementation of parametric insurance options,” he emphasised. One of the primary benefits of a parametric insurance pool for agriculture is its ability to provide prompt financial assistance to farmers in times of need. “Unlike traditional insurance, where claims are often subject to lengthy investigations and evaluations, parametric insurance payouts are triggered automatically when predefined conditions are met,” Faiz explained. “For example, in the case of flooding, policyholders of parametric insurance would receive a predetermined payout immediately as the flood occurs.

This provides an emergency source of financing that enables farmers to cope with unforeseen losses,” he added. Faiz said the farmers participating in indemnity-based insurance would experience delays in receiving payouts, as assessing flood damage and compensation takes time. Moreover, he said, the parametric insurance eliminates the need for extensive documentation and loss assessment procedures. Traditional insurance often requires farmers to provide detailed evidence of their losses, which can be time-consuming and burdensome.

With parametric insurance, payouts are triggered by specific indicators such as rainfall, temperature, or yield indexes, removing the need for complex claims verification. This will not only reduce administrative costs, but also minimise the potential for fraud, as the triggers are objective and transparent. “As we strive for a more sustainable and food-secure future, the adoption of parametric insurance in agriculture will be a crucial step towards building a resilient and thriving agricultural sector,” he said.

Credit : Independent News Pakistan-WealthPk