South Korean insurer KB Sonbo Insurance Company will soon launch a traditional market weather damage compensation insurance cover according to an exclusive news report by https://www.chosun.com.
To be launched as a group insurance product, this would be South Korea’s first index-based weather insurance that will deliver a fixed compensation for income lost due to vagaries of the weather, and these would include heatwaves, cold waves or heavy rains. It would not require any proof of actual damage.
The payout will be predetermined, if temperatures rise above a certain threshold or if rainfall exceeds a specific level, without requiring proof of specific damage.
The new product will pay up to KRW20,000 ($14.50) per day if daily rainfall exceeds 10mm, KRW25,000 if it exceeds 20mm, and KRW30,000 if it exceeds 30mm. The predetermined insurance payout increases as the threshold rises. If rainfall exceeds 80mm in a day, up to KRW50,000 can be received.
The policyholders can similarly choose and fix their thresholds for the weather events like heatwaves and cold waves as well. The lower the threshold, the higher the premium. The news report said the period for insurance payout is expected to be reduced from the existing two weeks (based on flood insurance) to three to five days, as the process of proving damage and reviewing insurance claims is shortened.
The insurer plans to sell the cover through subscriptions to traditional market merchants’ associations. The news report said while index-based insurance already dominates the weather insurance market overseas, South Korea has only recently begun to take concrete steps this year. It is considered a future-oriented insurance product.