Question 501
As notified in February 2025, which of the following companies introduced India’s first Air Quality Index-based parametric insurance for construction workers in the Delhi-National Capital Region?
- AOption (a)
National Insurance Company Limited
- BOption (b)
Tata AIG General Insurance
- COption (c)
Go Digit General Insurance Limited
- DOption (d)
Star Health and Allied Insurance
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Correct answer
Go Digit General Insurance Limited
Why this answer is correct
The correct answer is Go Digit General Insurance Limited.
Key Points
- In February 2025, Go Digit General Insurance Limited launched India’s first Air Quality Index (AQI)-based parametric insurance specifically designed for construction workers.
- This innovative insurance product is aimed at providing a financial safety net for workers in the Delhi-National Capital Region (NCR) whose livelihoods are severely impacted by construction bans during peak pollution months.
- The insurance follows a parametric model, which means the payout is not based on actual loss assessment but is automatically triggered when AQI levels exceed a pre-defined threshold (such as 400 or "Severe" category) for a specific number of days.
- This initiative primarily addresses the challenges faced by unorganized sector laborers during the implementation of the Graded Response Action Plan (GRAP) Stage III and Stage IV, which often leads to a complete halt of outdoor construction activities.
- The policy is designed to compensate for the loss of daily wages, ensuring that the most vulnerable segments of the urban workforce can sustain their living expenses during environmental crises.
Additional Information
- Parametric Insurance:
- Unlike traditional indemnity insurance that compensates for the actual cost of damage, parametric insurance pays out a fixed amount based on the occurrence of a specific trigger event.
- Common triggers include wind speed in hurricanes, rainfall levels in droughts, or in this case, AQI levels as recorded by the Central Pollution Control Board (CPCB).
- AQI and Delhi-NCR:
- The Air Quality Index (AQI) is a tool used by government agencies to communicate to the public how polluted the air currently is.
- In Delhi-NCR, pollution typically spikes during November to February due to stubble burning, vehicular emissions, and climatic inversions.
- The Commission for Air Quality Management (CAQM) enforces GRAP to mitigate these effects, often banning non-essential construction.
- Go Digit General Insurance:
- Founded in 2017 and headquartered in Bengaluru, Karnataka, the company is backed by Fairfax Financial Holdings.
- It was founded by Kamesh Goyal and has become a leading insurtech player in India, listing on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in May 2024.
- Socio-Economic Impact:
- There are approximately 10 to 12 lakh construction workers in the Delhi-NCR area.
- A construction ban can result in a loss of 15 to 20 working days in a season, leading to a income reduction of nearly Rs. 10,000 to Rs. 15,000 per worker, making such insurance products vital for poverty alleviation.
Important Points
- Digital Transformation: The Go Digit AQI policy leverages real-time data and digital claim settlements, reducing the administrative overhead and time usually associated with insurance claims for the poor.
- Climate Adaptation: This product is considered a significant step in climate risk adaptation, helping the labor force build resilience against increasing urban environmental hazards.
- Regulatory Oversight: All such parametric products in India are regulated and approved by the Insurance Regulatory and Development Authority of India (IRDAI) to ensure transparency and solvency.