Insuring Against Extreme Heat: A Randomised Evaluation

Heatwaves, intensified by climate change, hit the poorest the hardest. Many are exposed to dangerous temperatures through outdoor work or limited access to adaptive resources. In 2024, 37 cities in India surpassed 45°C (113°F), and around 40,000 heat stroke cases were reported. How can social protection systems evolve to address the growing losses caused by extreme heat? The researchers evaluate an innovative intervention in India that offers automatic daily wage payments to low-income workers when temperatures exceed a predetermined threshold. Developed by the Self Employed Women's Association (SEWA) – a union representing over 3 million informal workers – the scheme is the world's first parametric heat insurance product targeting earnings loss. The researchers use a randomized encouragement design, incentivizing SEWA officers to promote enrollment in 2,821 treatment villages, while 2,821 control villages receive no targeted outreach. Panel survey data – combined with high-frequency measurement during the hot season – will be used to estimate impacts on labor supply, financial decisions, health, consumption, and adaptive behavior. The researchers will also assess willingness to pay relative to actuarially fair pricing, providing evidence on the potential for commercial insurance-based heat protection.