A special task force formed by the Korea Insurance Development Institute along with insurance firms and weather forecasters is working to develop a new weather-based insurance programme at the request of the Korea Meteorological Administration.
The special task force consists of a number of insurance firms including Hyundai Marine & Fire Insurance, NongHyup Property & Casualty, Meritz Fire & Marine Insurance and Dongbu Fire, while the Korea Meteorological Institute and other weather forecast service providers from the weather forecasting sector are lending technological help, reported Korea Bizwire.
The project will look into insurance industry market trends in order to cater to businesses particularly vulnerable to extreme weather conditions such as heat waves and monsoon rains. The weather-based insurance programme will be index-based.
However, there are concerns as to how the damages caused by the weather will be calculated, particularly in the retail, home appliance, fashion and leisure industry, as it is hard to identify how much impact weather can have on sales performance.
Given the complex nature of the relation between sales and weather, the new project will refer to previous statistics when measuring compensation.
For instance, the amount of compensation given to companies when the temperature hits 40 degrees Celsius will be determined by previous cases under similar weather conditions.
In addition, another type of weather-based insurance programme targeting promotional events is also being discussed, which would cover companies that organise weather-dependent events such as a white Christmas.
“Due to requests to release a complete insurance programme as soon as possible, we are focusing on an easier project like a solar energy-related weather insurance programme in order to encourage participation from other companies,” the Korea Insurance Development Institute said.