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India is facing a growing climate crisis. From floods in Assam and Uttarakhand to the ongoing heat wave across North India, the frequency and intensity of extreme weather conditions are no longer an anomaly, they are becoming the new normal. According to Germanwatch’s Climate Risk Index, more than 400 extreme events have affected India since 1993, causing $180 billion in losses and more than 80,000 deaths.
Yet, our national insurance preparedness is dangerously inadequate. According to Swiss Re, more than 90% of climate-related losses are not insured. Insurers can navigate the transformation by leveraging data analytics, building digital ecosystems, strengthening cybersecurity, addressing climate risks, and adopting RegTech for streamlined compliance. Success will depend on continued innovation and strategic adaptation.
These incidents are no longer rare. Ended due to Cyclone Michong There was a loss of Rs 11,000 crore in Chennai and about 48,000 claims, of which 33,000 were settled, according to the General Insurance Council. Flash floods, glacial outbursts and heatwaves are becoming annual, exposing traditional insurance systems that rely on outdated data, leading to low premiums, low reserves and delayed settlements.
If we do not act, India risks a California-like situation, where insurers stop new policies due to losses, especially in coastal, flood-prone and urban areas.
Technology is now the engine of a climate-resilient insurance future, driving underwriting, claims, compliance and reinsurance. AI, IoT, automation and cloud tools enable dynamic risk assessment, cost-effective access and fast, fair payments.
Main levers include:
- Digital distribution platforms that make policies discoverable and affordable for underserved customers, reducing paperwork and friction.
- AI-powered risk profiling that blends historical data with real-time satellite, weather and IoT inputs to accurately price risk.
- Blockchain-enabled smart contracts to create transparent, tamper-proof claims triggering and settlements.
- Parametric insurance model where predefined thresholds (wind speed, rainfall, river levels) automatically trigger payments, eliminating disputes and delays.
The past is no longer a predictor of the future. AI/ML-powered platforms can merge real-time weather, satellite and soil absorption data to simulate hyperlocal risk scenarios. This helps insurers accurately assess climate risk, allocate reserves wisely, and expand into underserved areas. In one implementation a US-based insurer used AI-powered geospatial analysis for dynamic flood risk scoring, enabling real-time underwriting adjustments and reducing premium volatility during hurricane season.
India’s vast economy—farmers, gig workers and MSMEs—remain highly vulnerable. Traditional products fall short due to high costs, paperwork and low trust. Even among the insured, a 30-50% coverage gap remains, representing a missed opportunity for large-scale social impact.
Technology changes that calculation:
- Mobile-based microinsurance allows low-cost cover to be purchased and renewed over the phone, with premiums deducted in small instalments.
- Parametric products trigger automatic payments when conditions are met, such as compensation to farmers if rainfall exceeds a set level.
Globally, insurers are already deploying such models. For example, to support rural farmers affected by typhoons, a Southeast Asian insurer piloted a cloud-native parametric insurance platform that processes real-time weather and crop data, enabling payments within 48 hours, increasing renewals by 35%, and reducing fraud through automated triggers.
Claims processing is where trust is won or lost. Traditional systems fall behind after a disaster. AI-powered image recognition, drone sensing and anomaly detection streamlines claims and prevents fraud.
In another use case, a leading health insurer in the US automated 75% of claims using AI-led document ingestion, NLP and predictive analytics, reducing settlement from 15 days to 72 hours and reducing overhead by 40%, improving response to high-volume incidents.
Technology must go hand-in-hand with capital, with risk-pooling and large premiums amplifying the impact of digital claims.
For this transformation to happen at scale, we need a supporting ecosystem:
- Regulatory Agility: IRDAI’s ‘Insurance for All by 2047’ vision is timely, but it should be supported by a framework that encourages experimentation with parametric and microinsurance models.
- public Private Partnership: Co-investments in disaster bonds, risk pooling, and shared data infrastructure are important.
- Reinsurance Innovation: India should create reinsurance programs that actively bridge the underinsurance gap, especially for climate-related risks.
Insurers should stop avoiding high-risk geographic areas. Technology allows them to provide pricing, reinsurance and service in these areas.
Insurers cannot tackle climate risks alone. Achieving IRDAI’s ‘Insurance for All by 2047’ requires technology-driven solutions, flexible regulations and joint investment in risk pools and catastrophe bonds. Insurers should adapt to high-risk areas by adopting parametric models, partnering with startups, and supporting climate tech.
Every extreme weather event is a financial alarm bell – climate risk is financial risk. We must close the security gap rapidly. Insurers, regulators, startups and policy makers must come together using technology to build a climate-resilient India
This article is written by Zaheer Abbas, Executive Vice President and Business Head and Arjun Santhanam, Associate Vice President, Sales, BFSI.
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