Extreme Heat Is A Reality. Can Insurance Offer Workers A Financial Sunscreen?

For delivery workers, street vendors, construction labourers and the likes, there is little choice but to carry on. 

In this context of climate change, a fairly nascent heat protection product has hit the market, besides sunglasses and two-litre water bottles: Heat insurance for financial protection. 

Bajaj Allianz’s ClimateSafe plan is one of the few available in the market that covers extreme heat along with other climate-linked events. ICICI Lombard has also piloted a parametric scheme with support from Swiss Re and the Self-Employed Women’s Association (SEWA), covering thousands of women workers in Gujarat, Rajasthan, and Maharashtra.

Other insurers are likely to soon follow suit. 

Think of heat insurance as financial sunscreen. When official sources like the Indian Meteorological Department (IMD) show that temperatures are soaring, a payout is automatically triggered.

It is meant to cushion income losses for those who can’t afford a day off from the sun.

Trigger, Then Payout

Unlike traditional insurance, which involves filing claims and proving damage, most heat insurance products in India today are parametric or based on parameters. 

“Payouts are linked to specific weather conditions. For heat, if the city’s temperature crosses a certain threshold, say, 40 degrees Celsius, for several days in a row, the money is released by the system. There is no additional paperwork or inspections,” a Bajaj Allianz representative told The Secretariat on condition of anonymity. 

The approach is fast, targeted, and designed for those most likely to suffer lost wages during heatwaves. In the heatwaves of 2024, 90 per cent of the 50,000 women under ICICI Lombard and Swiss Re's Women’s Climate Shock and Insurance and Livelihoods Initiative received financial support. 

“The amount of money received through the payout depends on the daily income of each woman enrolled in the programme,” an ICICI Lombard official explained to The Secretariat. 

Not For Everyone. So Who Pays The Premium?

Heat insurance in India is still limited in reach. Current programmes tend to be tied to NGOs, cooperatives, or experimental public-private partnerships. For now, a large swath of India’s informal workforce is unlikely to be covered. But for heat insurance to pick up steam, it needs to find suitable parties to take on the cost of the premium.

India Inc. needs to come forth and protect its workforce, which includes the vulnerable gig workers and those associated through contractual employment.

"Heat insurance is critical, and an ad hoc approach will not work," a climate change expert told The Secretariat. 

The product design also matters. Parametric insurance works best when weather data is granular, reliable, and publicly available. India’s urban temperature monitoring still relies heavily on broad IMD datasets. More localised data collection via satellite sensors, private weather networks, or even mobile-based community reporting could improve accuracy and make payouts fairer.

Critics of such insurance schemes argue that they can act as a shortcut, offering compensation without actually fixing the dangerous conditions that make work in the heat so risky. Others believe that if embedded in public systems, insurance could help push cities toward more climate-resilient urban planning. 

A Band-Aid Or A Buffer?

India’s Heat Action Plans (HAPs), developed by state governments in response to rising temperatures, have leaned on public advisories and low-cost measures like cool roofs, hydration stations, and early warnings. 

But with rising urbanisation and a large informal labour force, experts warn that these plans are struggling to keep pace with the scale of the problem.

While state governments provide an ex gratia of Rs 4 lakh to the family of a person who dies of heat-related causes, that is only if the state has notified heatwaves as a “state disaster”, as Tamil Nadu, Telangana, Maharashtra and others have already done. More caveats, such as the recorded cause of death, further complicate the process. 

Last year, the official death toll from heatstroke stood at 360 lives, but studies put the number closer to 700. The true toll of this year will be revealed in a few months. Mortality is still the worst-case scenario.

There is a much larger population economically and medically affected by heat: Go to work, and it is a health burden; don’t go to work, and it's a financial burden. That’s where heat insurance has entered the picture as both a financial buffer and a policy signal. It recognises that heatwaves don’t just impact health, but incomes. 

Health-focused responses aim to prevent heatstroke, but insurance addresses the economic toll: fewer customers on the street, lower productivity, hours shaved off a workday. It fills a key gap in India’s disaster response system, where heat still isn’t treated as a major hazard on par with floods or cyclones.

At the same time, concerns remain. 'Basis risk', or the mismatch between recorded city temperatures and actual conditions on the ground, can leave many without protection.

Someone working on hot concrete or a brick kiln may suffer just as much as a worker in another part of the city, but may not qualify for a payout if the official temperature hasn’t hit the threshold. 

There are also questions about affordability and sustainability. Many current schemes rely on donor funding or subsidies, and scaling them up without pricing out low-income workers remains a challenge.

Policy Must Lead The Way

On June 12, the National Disaster Management Authority (NDMA) issued a landmark advisory to protect informal workers from extreme heat. It called for integrating these workers into city-level Heat Action Plans, providing access to shade and hydration, and ensuring income protection, explicitly including social insurance as a recommended tool. 

This suggests that the government sees heat not just as a health risk, but as a livelihood crisis.

If heat insurance is to succeed, it can’t operate in isolation. It will need regulatory oversight to ensure fairness, public co-investment to keep premiums affordable, and integration with wider climate adaptation efforts. 

An improvement in data systems can help capture the true extent of heat risk. At the same time, public messaging needs to shift to recognise heat as a disaster in its own right, not just a seasonal discomfort.

Once again, India stands at a policy crossroads. Heat insurance could become a pillar of climate resilience, or it could remain a temporary patch. 

Like sunscreen, it protects best when applied in time, in layers, and as part of other protective measures. Whether the country adopts it as a climate essential or leaves it on the shelf will depend on the political will to treat heat as the systemic risk it truly is.