Series: Trigger Point • Part 2 of 3

The Time Tax: Why 'Wait and See' is Killing Insurance Trust

Parametric

|25 Dec 2025|7 min read

Liquidity is the only true form of relief. Why settlement velocity, not just coverage amount, is the ultimate metric for survival in 2025.

Siddesh Ramasubramanian

Chief Executive Officer, InRisk Labs

The Time Tax: Why 'Wait and See' is Killing Insurance Trust

In the world of risk, we talk about premiums and coverage. But we rarely discuss the Time Tax—the hidden economic drain caused by the gap between a disaster occurring and a check clearing.

For a business owner in Kerala or an SME in Tamil Nadu, a claim settlement that arrives 300 days after a catastrophe isn't a "safety net." It’s a post-script. By the time the money arrives, the debt is deep, the market share has shifted, and the trust is broken. In 2025, liquidity is the only true form of relief.

The Anatomy of a Delay: The Settlement Triangle

Traditional insurance relies on Indemnity, which requires physical proof of loss. This creates a "Time Tax" that varies wildly. While a parametric policy aims for 100% settlement within 7 to 30 days, traditional lines are plagued by a long, exhausting "tail."

Industry Settlement Patterns (Agriculture & Property)

Based on 2024-25 Industry Development Trends for NATCAT events:

Time Since Event	% Settled	Capital Status
0 – 6 Months	45% - 55%	Only clear-cut, low-value 'express' claims.
6 – 12 Months	25% - 30%	The 'Mid-Tail': Stuck in forensic audits & yield disputes.
12 – 24 Months	10% - 15%	The 'Long-Tail': Complex Industrial BI disputes.
24+ Months	5% - 8%	The 'Tail of Despair': Litigation or complex recovery.

The Kerala 2018 Anatomy: A Liquidity Death Spiral

Why speed—not just money—is the ultimate metric of survival.

A. The Exposure Gap

The PDNA estimated damage at ₹26,720 crore. Insured losses were merely ₹1,500 – ₹2,000 crore. Over 95% of the loss was uninsured.

B. The O/S Nightmare

Landslides in Idukki cut off roads for a month. Surveyors couldn't verify "damage to soil." Six months post-flood, the Outstanding (O/S) ratio remained at 30–40%.

C. The Debt Spiral

Victims turned to moneylenders at 24% to 36% interest. A plantation owner's recovery funds were gone to interest payments before he could buy a single seed.

The Human Cost: The Idukki Suicides

"Debt collectors move faster than claim adjusters."

The Velocity Gap:Banks initiate recovery (SARFAESI) in 90 days. Insurers take 270+ days to verify yield losses.The Outcome:The "Time Tax" was paid in lives, not just interest. Over 10 suicides were linked to this specific debt distress.

Why This Kills Trust and "Uptake"

The "Double-Kharif" Delay

Nearly 25% of agricultural claims from one season remain unresolved as farmers enter the next. This skips two full productive cycles, making farmers 3.5x more likely to default on loans.

The "Sunk Cost" Fallacy in SMEs

If an insurer takes months to appoint a surveyor, an SME has already lost vendor contracts. Month 6 money is functionally equivalent to no insurance. Protection gaps for SMEs remain over 90%.

III

The Trust Deficit: The "Referee" Problem

64% of IRDAI complaints stem from disagreement over claim quantum and undue delays. The technical "Condition of Average" feels like a betrayal to the policyholder.

Conclusion: Certainty is the New Coverage

Buyers are now choosing the Certainty of a Data Trigger over the Uncertainty of a Human Survey. Even if a parametric payout is a lump sum that doesn't cover 100% of the damage, the speed of that cash allows the business to survive.

"A perfect payout tomorrow cannot fix a bankruptcy today. The Idukki suicides prove that in a catastrophe, the pursuit of 'perfectly accurate indemnity' is a lethal distraction."

I started my career in an insurance landscape where settlement delays were "business as usual." But seeing the real-world consequences—the debt spirals and human cost—has changed my perspective. I wish to end my career in a world where a settlement delay is a rare, one-off event.

Next in the Trigger Point Series:

How do we build a system with no surveyors? In Post 3: The Data Grid, we look at how the data sources and high-resolution satellite oracles are finally making the Surveyor's Clipboard a thing of the past