Take-up and Impacts of Parametric Insurance for Labor Supply under Climate Change

Heat stress increasingly poses a risk to low-income outdoor delivery workers in India, forcing them to face the precarious trade-off between dealing with heat-related health risks and foregone income by taking time-off. This can lead to higher costs for platform businesses through productivity losses, worker turnover and operational challenges. To help the delivery workers adapt to weather extremities without income loss, we propose offering a parametric insurance product, allowing heat-sensitive workers to adjust their labor supply without financial loss during peak heat periods. 
The researchers propose a scoping exercise and a pilot Randomized Controlled Trial with gig workers in New Delhi NCR. A partner inclusion platform will develop the insurance product. Parametric insurance automatically triggers payouts when predefined weather thresholds, such as maximum temperatures, are met, eliminating the need for workers to prove their losses. Through platform integration, payouts will be seamlessly distributed, ensuring quick compensation for income loss. The researchers measure the impact of insurance and targeted campaigns on the labour supply and health of workers as well as business returns of the platform business through high frequency survey data and firm’s administrative data. The proposed adaptation strategy emphasizes the role of private-sector engagement, particularly platform-based businesses, in addressing environmental and social challenges. If found impactful, parametric heat insurance could be scaled and integrated in the many social security measures that are due for the gig workers.