South Korea will introduce its first index-based weather insurance next month, offering compensation to small business owners hit by extreme weather conditions.
The new product is designed to help traditional market merchants whose income suffers during heatwaves, cold snaps, or heavy rain. Unlike conventional policies, payouts are triggered when weather thresholds are exceeded, without requiring proof of actual damage.
A snack vendor in Gangneung, Gangwon Province, described the financial strain caused by this summer’s heatwave. “Even tourists who park outside and have to walk just five minutes find it difficult to come in,” he said. “In the past, rainy days were my biggest worry, but now business slows down when it’s too hot or too cold.”
KB Sonbo Insurance Co., Ltd. announced on the 10th that it will launch the Traditional Market Weather Damage Compensation Insurance as a group insurance plan. Previously, merchants were only eligible for compensation under flood insurance when physical damage occurred. The new policy instead provides fixed daily payouts based on rainfall or temperature levels.
Under the plan, merchants can receive:
Rainfall payouts: 20,000 won if daily rainfall exceeds 10mm, 25,000 won above 20mm, 30,000 won above 30mm, and up to 50,000 won if rainfall surpasses 80mm in a day.
Cold wave payouts: 5,000 won if the daily minimum temperature falls below -8°C, 10,000 won below -10°C, 25,000 won below -12°C, and 35,000 won below -13°C. In Jeju, where winters are milder, payouts are capped at 5,000 won when temperatures dip below -5°C.
Heatwave payouts: 15,000 won if temperatures rise above 33°C.
Policyholders can select their own payout thresholds, with lower thresholds requiring higher premiums.
The insurance process will also be faster than existing flood insurance. Payouts are expected to be delivered within three to five days, compared with the two-week waiting period required for damage verification under traditional policies.
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