The Impact of Climate Change and Sustainability Standards on the Insurance Market E-Book
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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
The Impact of CLIMATE CHANGE and SUSTAINABILITY STANDARDS on the INSURANCE MARKET The book explores the role of the insurance industry in contributing and responding to the harms that climate change has brought. This book delves into the physical and logical impacts, both direct and indirect, on the insurance industry. Subjects discussed include new technology such as big data, artificial intelligence, machine learning, the growth of sustainable economics with foreign direct investments (FDIs), trustworthiness, and ethics. Related use cases of data science for claim processing, fraud detection and prevention, policy administration, pricing, and underwriting are discussed along with cyber security issues, data protection, and big data regulatory reforms. To promote ESG sustainability, the insurance industry plays a critical and significant role. Climate-related risks are being factored into underwriting and investing strategies. Through their own operations and business activities, insurers may promote the ESG agenda and move towards sustainability. Also discussed are promoting diversity and inclusion, lowering greenhouse gas (GHG) emissions, resolving gender inequality, and helping communities through charitable work, which all improve a company's brand, reputation, and ESG credentials. Audience The book is specially designed for administrators, lecturers, researchers, students of insurance and sustainability, students in financial services, insurance practitioners, actuaries, loss adjusters, underwriters, regulators, facilities management, utility companies, voluntary organizations, government departments, business leaders, policymakers, decision-makers, investors, risk managers, compliance managers, and audit managers amongst many others.
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Veröffentlichungsjahr: 2023
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Table of Contents
Cover
Series Page
Title Page
Copyright Page
Foreword
Preface
Part I: THE IMPACT OF DIGITALISATION AND LINES OF INSURANCE ON SUSTAINABLE DEVELOPMENT
1 Sustainability Through Digital Insurance
1.1 Introduction
1.2 Theoretical Background
1.3 Sustainability and Digital Insurance
1.4 Digital Insurance and Sustainable Goals
1.5 Findings
1.6 Conclusion
1.7 Implications
References
2 Motor Vehicle Insurance Industry in India: A Review
2.1 Introduction
2.2 The Rationale for the Study of VMI in India
2.3 Literature Review
2.4 Objective
2.5 Methodology
2.6 Discussion
2.7 Findings
2.8 Result
2.9 Conclusion
References
3 Demystifying the Prospects for Insurance Companies to Finance the Energy Metamorphosis: A Study on Indian Insurance and Sustainable Development
3.1 Introduction
3.2 Present Status of India in Energy Transition
3.3 The Prospects for Insurance Enterprises to Finance the Energy Metamorphosis
3.4 The Reasons Why India’s Renewable Energy Investments are Anticipated to Expand
3.5 Harnessing Insurance for Sustainable Development
3.6 Conclusion
References
4 Artificial Intelligence in the Health Insurance Sector: Sustainable or Unsustainable from the Lens of Ethical-Legal and Socio-Economic Standards
4.1 Introduction
4.2 Conceptualizing Sustainable Health Insurance
4.3 Integration of Artificial Intelligence in Health Insurance: A Background
4.4 Integration of AI in Health Insurance: A Bird’s Eye View from Ethical Implications Perspective
4.5 Integration of AI in Health Insurance: Evaluation of Socio-Economic Repercussions
4.6 Integration of AI in Health Insurance: Requirement of Ideal Model Legal Standards for India
4.7 Recommendations
4.8 Concluding Remarks
References
5 Medical Crowdfunding: From the Lens of Health Insurance
5.1 Introduction
5.2 Crowdfunding in Healthcare: Medical Crowdfunding
5.3 Medical Crowdfunding: Compliment to Health Insurance
5.4 Medical Crowdfunding: Concerns and Consequences
5.5 Concluding Remarks
References
6 Digital Transformation of the Insurance Industry – A Case of the Indian Insurance Sector
6.1 Introduction
6.2 Literature Review
6.3 Conclusion
References
Part II: THE IMPACT OF CLIMATE CHANGE ON INSURANCE MARKETS
7 Climate Resilient Agriculture: Binding Agriculture Innovations and Insurance
7.1 Introduction
7.2 Agricultural Innovation and Trends
7.3 Agricultural Innovation for Agricultural Productivity
7.4 Agricultural Insurance and Trends
7.5 Agricultural Insurance and Poverty Eradication
7.6 Innovations within Agricultural Insurance
7.7 Challenges and Difficulties Associated with Agricultural Innovation
7.8 Barriers to Agricultural Insurance Adoption
7.9 Future Projection of Agricultural Innovation and Insurance
7.10 Conclusion
References
8 Climate Change Resilience Support in the Insurance Sector
8.1 Introduction
8.2 Catastrophe Insurance and Climate Change
8.3 Carney Defines Climate Risks
8.4 Heading Towards Reducing Carbon Footprints
8.5 Climate Change Adaptation and Mitigation: Paradigm Shift
8.6 Building Resilience
8.7 Critical Infrastructure Decarbonation and Climate Resilience Emphasis
8.8 Combating Challenges
8.9 Role of Stakeholders
8.10 Role of Government
8.11 Recommendations at Company Level
8.12 Recommendations at Industry Level
8.13 Mitigating Losses with Technology
8.14 Conclusion
References
9 Sustainable Climate Change and its Impact on the Insurance Sector
9.1 Introduction
9.2 Science and Politics of Climate Change
9.3 The Implications of Climate Change for the Insurance Sector
9.4 The Insurance Sector’s Present Attitudes Towards Climate Change
9.5 Motivations for Thinking Differently About Climate Change
9.6 Avoiding Risks from Natural Disasters
9.7 The Insurance Industry’s Approach to Environmental Policy
9.8 Variation on a Global Scale
9.9 The Role of Government in Preventing Natural Disasters
9.10 Natural Disaster Cooperation Framework
9.11 Added Prospects for Insurers
9.12 Concluding Remarks
References
10 A Study Regarding the Effectiveness of Environmental Education on Climate Change
10.1 Introduction
10.2 Literature Review
10.3 Theoretical Concerns
10.4 Research Objectives
10.5 Inference
10.6 Conclusion
References
11 Contribution of the Insurance Sector in Sustaining the Climate: An Analytical Study
11.1 Introduction
11.2 Sustainable Insurance
11.3 Principles for Sustainable Insurance
11.4 Role of Insurance Sector in Climate Change
11.5 Sustainability Highlights and Initiatives Taken for Climate by SBI Life
11.6 Energy Conservation Initiatives
11.7 Reduction of Carbon Footprints Plays a Vital Role in Sustaining the Climate
11.8 Enhancing Sustainability Through Insurance
11.9 Conclusion
References
12 Impact of Climate Change on Agriculture
Abbreviations
12.1 Introduction
12.2 Agricultural Insurance – Risk Management
12.3 Various Agriculture Insurance Programs
12.4 Crop Insurance
12.5 Impact of Climate Change on Agriculture
12.6 NICRA Assisted Farmers to Cope with Climate Variation
12.7 Conclusion
References
13 Climate Change: Not Only a Projection for Emerging Risks But a Reality for the Insurance Sector
13.1 Introduction
13.2 Impact of Climate Change on Global Insurance Industry
13.3 International Practice of Insurance Mechanism in Combating the Risk of Climate Change
13.4 Conclusion
References
14 A Systematic Review of ESG Investing and Climate Change as a Sustainable Practice in the Insurance Industry
14.1 Introduction
14.2 Review of Literature
14.3 Research Methodology
14.4 Data and Network Analysis
14.5 Conclusion
References
15 SLR on Aspects of Climatic Change in the Agriculture Industry in the Context of Weather Index Insurance: Visualization Through Network Diagrams
15.1 Introduction
15.2 Review of Literature
15.3 Research Methodology
15.4 Data and Network Analysis
15.5 Conclusion
References
16 Impact of Climate-Disruptive Industries on the Global Insurance and Risk Management Scenario
16.1 Introduction
16.2 Objective of the Study
16.3 Review of Literature
16.4 Research Gap
16.5 Findings
16.6 Discussions and Conclusion
References
17 Examining the Antecedents and Consequences of Corporate Commitment Towards Climate Change
17.1 Introduction to Climate Change
17.2 Literature Review
17.3 Antecedents of Climate Change
17.4 Consequences of Climate Change
17.5 Conclusion
References
18 Climate Change and the Insurance Sector: An Analysis of Sustainable Development in India
18.1 Introduction
18.2 Purpose
18.3 Methodology
18.4 Findings and Discussion
18.5 Opportunities for Sustainable Insurance
18.6 Conclusion
References
Part III: THE IMPACT OF BEHAVIOUR, CULTURE, EDUCATION AND INTERNAL CONTROLS
19 The Role of Internal Audit in Risk Management with a Perspective of Sustainability Development
19.1 Introduction
19.2 Literature Review
19.3 Case Discussion
19.4 Contribution of Study
19.5 Conclusion
References
Website
20 Environment Education and Insurance Awareness – A Boon to Indian Insurance Sector
20.1 Introduction
20.2 The History of India’s Insurance Sector
20.3 Insurance Plays a Vital Role
20.4 School and University Teaching Environment Awareness
20.5 Different Benefits of Environment Education in Society
20.6 Teacher and Students Empowered
20.7 Conclusion
References
21 Cultivating Sustainable Behavior and Critical Consciousness Towards the Environment: Environmental Education for Sustainability
21.1 Introduction
21.2 Environmental Education as Concept: Promoting Sustainability
21.3 Environmental Education as an Approach for Addressing Environmental Problems
21.4 Dealing with Complexities: Changing the Scenario with Environmental Education
21.5 Making Students Environmental Conscious with Environmental Education
21.6 Teachers’ Role in Achieving the Goals of Environmental Education
21.7 What is Next? It is: Being Innovative in Environmental Education
21.8 Conclusion
References
22 Adoption of ESG by the Insurance Industry: Conceptual Framework and Future Recommendations
22.1 Introduction
22.2 Principles of ESG Integration in Insurance Sector
22.3 ESG Implementation Framework
22.4 Conclusion and Discussion
References
23 Sustainable Solutions for Insurance and Risk Management
23.1 Introduction
23.2 Literature Review
23.3 Research Methodology
23.4 Discussion
23.5 Result and Conclusion
23.6 Challenges and Limitations
References
24 Target 8.8: Protect Labor Rights and Promote a Safe Working Environment
24.1 Introduction
24.2 Review of Literature
24.3 Research Methodology
24.4 Target 8.8
24.5 Conclusion
References
25 A Study on Challenges to Sustainable Development
25.1 Introduction
25.2 Aim of the Research
25.3 Methodology
25.4 Discussion
25.5 Factors Influencing Sustainable Development
25.6 Challenges in Achieving SDGs
25.7 Conclusion
25.8 Suggestions
References
26 E-waste Management: A Transition Towards a Circular Economy
26.1 Introduction
26.2 Worldwide E-waste Structure
26.3 Strategic Approaches
26.4 DEMATEL Method
26.5 Assessment of Life Cycle
26.6 Challenges Related to E-waste Recycling
26.7 Conclusion
References
27 Environmental, Social, and Governance (ESG) Measures and Their Impact on Insurance Industry: A Global Perspective
27.1 Introduction
27.2 Literature Review
27.3 Trends Shaping ESG in the Insurance Sector
27.4 ESG Challenges in the Insurance Sector
27.5 Conclusion
References
28 Environmental Risk and Sustaining the Insurance Industry
28.1 Introduction
28.2 Review of Literature
28.3 Literature Analysis
28.4 Conclusion
References
29 Global Energy Crisis: Impact on the Global Economy
29.1 Introduction
29.2 Review of Related Studies
29.3 Understanding the 2021-2022 Global Energy Crisis
29.4 Methodology
29.5 Empirical Results
29.6 Conclusion
References
Index
End User License Agreement
List of Tables
Chapter 2
Table 2.1 Reduction of automobile for passenger vehicles and commercial vehicl...
Table 2.2 Sales of the motor car in India.
Table 2.3 Motor underwriting performance in USD.
Chapter 10
Table 10.1 Hypothesis testing.
Table 10.2 Hypothesis testing.
Chapter 12
Table 12.1 Pradhan Mantri Fasal Bima Yojana.
Table 12.2 Weather-based crop insurance scheme.
Table 12.3 Coconut palm insurance scheme.
Table 12.4 Unified package insurance scheme.
Chapter 13
Table 13.1 Economic damage by natural disaster from 1900 to 2019 [7].
Chapter 14
Table 14.1 Influential Journals on ESG, climate change, sustainability and ins...
Table 14.2 Citation of source.
Table 14.3 Citation with authors.
Chapter 15
Table 15.1 Publication count as per the document type.
Table 15.2 Influential Journals on climate change, agriculture industry, weath...
Chapter 18
Table 18.1 Climate vulnerability of different Indian zones.
Chapter 19
Table 19.1 ESG risk and role of internal auditor.
Table 19.2 Stages involved in internal audit.
Chapter 26
Table 26.1 Different categories of waste.
Chapter 28
Table 28.1 The top 15 articles with highest citations.
Table 28.2 The source of data collection and country-wise and year-wise analys...
Chapter 29
Table 29.1 Regional correlation of gasoline price (Pearson correlation analysi...
Table 29.2 Gasoline price - granger causality tests.
List of Illustrations
Chapter 1
Figure 1.1 Connected insurance potentialities. Authors compilation.
Figure 1.2 Digital disruption in insurance. Author’s compilation.
Chapter 2
Figure 2.1 Estimated population and vehicles in India.
Figure 2.2 Earned premiums(net), IMI 2014 -2023.
Figure 2.3 Diagrammatic presentation of the VMI Act 2019 amendment.
Chapter 3
Figure 3.1 Industry trends of energy transition in India.
Figure 3.2 Total installed capacity for renewable energy in India as of 31 Dec...
Chapter 6
Figure 6.1 Insurance density premium per capita.
Figure 6.2 Online insurance market in INR Billion India (2019–2024).
Figure 6.3 Number of digital buyers, in million, India (2014–2018).
Figure 6.4 Number of startups in India (2020).
Figure 6.5 Types of Insurtechs in the Indian market, 2020.
Figure 6.6 Top-Funded Business Models, 2020.
Chapter 7
Figure 7.1 A model of agricultural innovation system.
Figure 7.2 Agri-innovation system components.
Figure 7.3 Common initiatives of agricultural innovations.
Figure 7.4 Seven principles for poverty-focused climate risk insurance.
Chapter 9
Figure 9.1 Thinking differently about climate change [17].
Figure 9.2 Other opportunities for insurers [19].
Chapter 10
Figure 10.1 Your age?
Figure 10.2 Belief in climate change.
Figure 10.3 Were you taught environmental studies?
Figure 10.4 General awareness regarding environment.
Figure 10.5 Belief in environmental education.
Figure 10.6 Graph denoting awareness around environment-based decisions.
Chapter 13
Figure 13.1 Number of recorded natural disasters [7].
Figure 13.2 McKinsey global insurance pools (2021) [18].
Chapter 14
Figure 14.1 PRISMA model.
Figure 14.2 Year-wise count of documents.
Figure 14.3 Co-authorship with countries.
Figure 14.4 Co-authorship with authors.
Figure 14.5 Co-occurrence of all keywords.
Figure 14.6 Co-occurrence of index keywords.
Figure 14.7 Bibligraphic coupling of documents.
Figure 14.8 Bibliographic coupling of countries.
Chapter 15
Figure 15.1 PRISMA model.
Figure 15.2 Publications by year.
Figure 15.3 Alluvial diagram showing the top 10 Journals along with their coun...
Figure 15.4 Alluvial diagram showing the top 10 Authors based on citation alon...
Figure 15.5 Alluvial diagram showing rank score of publications by top 10 Auth...
Figure 15.6 Co-occurrence of all keywords.
Figure 15.7 Co-citation of cited sources.
Figure 15.8 Co-citation of cited authors.
Chapter 16
Figure 16.1 Flow of losses to the insurance industry. Source [41].
Figure 16.2 Current result of industrial disparity. Source [28].
Chapter 18
Figure 18.1 Insurance penetration over the years.
Chapter 19
Figure 19.1 Types of risk in insurance industry.
Chapter 20
Figure 20.1 Insurance industry market growth in India.
Chapter 22
Figure 22.1 Holistic ESG adoption framework.
Chapter 23
Figure 23.1 Opportunities for sustainable choice among consumers. Adapted from...
Chapter 26
Figure 26.1 General concept of a circular economics in E-waste management.
Figure 26.2 Current practices for E-waste management system.
Figure 26.3 Pictorial representation of a new E-waste management system [20].
Chapter 27
Figure 27.1 Trends shaping ESG in the insurance sector. Sources: Author’s own ...
Figure 27.2 ESG challenges in the insurance sector. Sources: Author’s own elab...
Chapter 29
Figure 29.1 Gasoline price in African countries. Source/Credit: Trading Econom...
Figure 29.2 Gasoline price in European countries. Source/Credit: Trading Econo...
Figure 29.3 Gasoline price in Asian countries. Source/Credit: Trading Economic...
Figure 29.4 Gasoline price in Middle East and Oceania countries. Source/Credit...
Figure 29.5 Gasoline price in the region of Americas. Source/Credit: Trading E...
Guide
Cover Page
Series Page
Title Page
Copyright Page
Foreword
Preface
Table of Contents
Begin Reading
Index
WILEY END USER LICENSE AGREEMENT
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Scrivener Publishing100 Cummings Center, Suite 541JBeverly, MA 01915-6106
Publishers at ScrivenerMartin Scrivener ([email protected])Phillip Carmical ([email protected])
The Impact of Climate Change and Sustainability Standards on the Insurance Market
Edited by
Kiran Sood
Chitkara Business School, Chitkara University, Punjab, India
Simon Grima
Department of Insurance and Risk Management, University of Malta, Msida, Malta
Peter Young
Opus College of Business, University of St. Thomas, Minneapolis, USA
Ercan Ozen
Department of Banking and Finance, School of Applied Sciences, University of Uşak, Turkey
and
Balamurugan Balusamy
Associate Dean, Shiv Nadar University, India
This edition first published 2023 by John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA and Scrivener Publishing LLC, 100 Cummings Center, Suite 541J, Beverly, MA 01915, USA© 2023 Scrivener Publishing LLCFor more information about Scrivener publications please visit www.scrivenerpublishing.com.
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Library of Congress Cataloging-in-Publication Data
ISBN 978-1-394-16651-0
Cover image: Pixabay.ComCover design by Russell Richardson
Foreword
Sustainability is the new paradigm of the 2021 to 2027 Strategic Cycle: The Green Deal Transition. All want to be the first climate-neutral continent with a sustainable, modern, resource-efficient and competitive economy that leaves no one or place behind. Eco-innovation can be a “means to achieve a circular economy.” It is also a strategy for developing leadership. The priority is a green innovative world.
Globally, the insurance industry is in a unique position regarding climate risk as insurers are exposed on both sides of the balance sheet. This book explores the insurance industry’s role in both contributing to and responding to the harmful effects brought on by climate change in order to ensure sustainability. Moreover, it discusses the emergence of analytics in big data and artificial intelligence, which are the tip of the iceberg for profound transformation in the insurance market. Many established insurance companies have invested heavily in the automation of insurance products. Over time, these insurance products have been diversified to meet challenging and dynamic environments, social and economic needs.
Climate change and sustainability have become significant issues in scientific, political, and legal circles, which may have profound implications for the insurance industry. For the financial services sector, including insurers, the Environmental, Social and Governance (ESG) agenda has grown in importance and has gained global public and political attention. In 2016, the Paris Agreement became a legally binding international treaty on climate change. As a result, social justice issues like gender equality, social inclusion, and diversity have grown in importance.
With the COVID pandemic, companies are prioritizing the ESG strategy and corporate stewardship. Along with the stark realities of COVID has come a wider appreciation of macro-level risks in general—climate change included—and how these factors can dramatically turn the business tables. For insurers, this means incorporating ESG into underwriting, investing, and risk management decisions and developing tailored ESG products and services. Incorporating ESG factors and assessing risks and rewards is critical as it assesses a company’s resilience to environmental and social risks and the societal impact of an investment or underwriting.
As long-term asset custodians, insurers are more vulnerable to sustainability challenges than most other types of investors, and controlling ESG exposures is arguably an existential issue for them. As governments and regulators expressly focus their ESG edicts on long-term investors, particularly big asset owners such as the insurance sector, they are increasingly scrutinized by politicians.
Since insurers oversee about $30 trillion in global assets, some of which have been held for decades, ESG laws should have a greater influence on the insurance business than on others. This regulatory effort is spreading globally, exposing insurers to both actual ESG risks and particular new regulatory risks through their underwriting and investing activities— creating a problem on two fronts.
To promote ESG sustainability, the insurance industry plays a critical and significant role. Climate-related risks are being factored into underwriting and investing strategies. Through their own operations and business activities, insurers may promote the ESG agenda and move towards sustainability. Promoting diversity and inclusion, lowering greenhouse gas (GHG) emissions, resolving gender inequality, and helping communities through charitable work will all improve the company’s brand, reputation, and true ESG credentials.
Even if there are risks and expenses associated with implementing ESG, such as increasing costs, insurers should look past them and recognize the need to prioritize this topic to secure the future success of their businesses. Not only are these ESG-conscious actions likely to decrease costs in the long run, but they also provide an opportunity to appeal to the rising market of ESG-conscious customers while also facilitating positive financial returns on investments.
The impact of climate change and sustainable standards on the insurance market will trigger a new frame of discussion across the globe as it is high time to peep into the insurance sector economy, especially when the latest financial crisis in 2008 and COVID-19 have shaken its stability after many decades.
This edited book covers various climate change impacts and challenges for the sustainability of the insurance market. The recent trends and technology, including artificial intelligence (AI) and distributed ledger technology, are well considered in this text to give a true picture to the readers. Some sustainable solutions for insurance and risk management are also addressed. Areas included in this book are the agriculture, education, health and social sectors, which were and are still being impacted by climate change and the other disruptions covered in this book. Besides which, it also looks into the past with a view of futuristic challenges and their remedies for sustainability standards in the insurance market.
I am sure this book will provide the reader with an enjoyable read providing new insights into the global measures of the social, environmental, and economic scenario.
Prof. (Dr.) Manpreet Singh Manna
President Awardee
Pro-Vice Chancellor, Chandigarh University, Punjab, India
Former Director, AICTE
Preface
Even though climate-related threats present a huge risk to the insurance industry, the sustainability agenda is an opportunity for purposeful growth across the globe. This book explores the insurance industry’s role in both contributing and responding to the disruptions that climate change has brought. Since insurance is the only sector where the cross-selling of banking and insurance products is possible, this adds value to the literature written about it; which is why there is still the need for more literature on the subject, especially after seeing how COVID-19 has transformed many sectors worldwide.
Motor and health are the top two segments of the global insurance industry currently struggling with sustainability issues. However, there are also sustainability issues in other segments of the insurance industry, such as fire, marine, travel, property/casualty, catastrophic risk management, and life insurance, in the largest economies like those of the USA, EU and China, in addition to those of many developing countries.
This book delves into the physical and logical impacts, both direct and indirect, on the insurance industry. New tech, such as big data, artificial intelligence, and machine learning, in the growth of sustainable economics with foreign direct investments (FDIs), trustworthiness and ethics are discussed. Related use cases of data science for claim processing, fraud detection and prevention, policy administration, pricing and underwriting are discussed along with cyber security issues, data protection, and big data regulatory reforms. The book is structured in such a way as to provide an overall understanding of the current practices, trends, and future technologies in the insurance market.
Contemporary critical views of emergent technologies for all insurance segments are presented that will be of interest to a wide spectrum of readers, from CEOs to university lecturers to students. The narrative aims to help readers upgrade their technology literacy and overcome the fear that artificial intelligence (AI) engenders. The book will be of particular use to undergraduate and postgraduate students interested in insurance and financial technology. It will also be an indispensable resource for practitioners, legislators and policymakers involved in cross-border operations. The information presented is interdisciplinary and includes the AI market, policymakers and economists in environmental/climate science, local governments, and industry that generally intersect with insurance claims in all insurance segments across the globe.
This edited book is a result of the prayers, efforts, blessings and the love of my family and friends. I want to thank them all and especially acknowledge and extend my heartfelt gratitude to a few who have made completing this book possible. My special thanks to Prof. Simon Grima for his valuable guidance and support. Furthermore, I sincerely thank Prof. Ercan Ozen, Prof. Peter Young and Dr. Balamurugan Balusamy. I also want to thank to Martin Scrivener, President of Scrivener Publishing, who helped me greatly. Finally, my sincere gratitude goes to the chapter authors who contributed their time and expertise to this book.
Simon Grima
Department of Insurance, Faculty of Economics Management and Accountancy
University of Malta, Msida, Malta
Kiran Sood
Chitkara Business School
Chitkara University, Punjab, India
May 2023
Part ITHE IMPACT OF DIGITALISATION AND LINES OF INSURANCE ON SUSTAINABLE DEVELOPMENT
1Sustainability Through Digital Insurance
Satinder Singh*, Jashandeep Singh and Shilpi Gupta
Chitkara Business School, Chitkara University, Punjab, India
Abstract
This chapter aims to highlight the unprecedented role of digital insurance in achieving sustainability. As the world has been continuously striving to reduce its complete dependency on paperwork to combat deforestation, water pollution, security risks, and ensure sustainable development. This study merges scholarly opinions with what is the scope of the digital insurance world under the principles of sustainable insurance, and whether digital insurance can ensure sustainability. The digitization of the insurance platform addresses the most significant answers to problems such as how to bring down the paperwork to zero, ensure the complete system is eco-friendly, bring every important stakeholder online, bridge the gap between development in the insurance sector without compromising with natural resources, and how close we can go to ensure sustainable development with insurance sustainability principles. The digitization of insurance operations welcomes sustainability and helps in meeting sustainable development goals. However, there are certain challenges before the entire insurance industry that cannot be ignored at any cost to ensure sustainability. This practical aspect highlights the key transforming scenario via the digital platform for insurance companies and explains how being digital can bring forth the merger of sustainability with expanding digital ecosystem.
Keywords: Digitization, digital insurance, sustainability, sustainable goals, ecology
1.1 Introduction
The world has been striving to reduce its complete dependency on paperwork because it causes deforestation and water pollution, compromises security, and is one of the environmentally unfriendly acts that drain the revenue proportion [1]. The intricacy of paperwork always creates confusion among customers at the time of subscribing to any insurance policy, and likewise when they file for a claim from an insurance company. The need of the hour is customers, nowadays, demand insurers should bring ease and accessibility to the insurance sector as they are enjoying in other sectors [2], and they also look for ‘mobility’ that does not lose the connection among policy subscribers, old insurers, and technology manufacturers [3]. To cater to the needs of the customers, insurers can tap into a new way of generating revenue if they change their conventional ways and go for an ecosystem mindset [4]. The answer lies in the digital mode of insurance that can offer zero dependencies on paperwork and smoothen the operation at the fingertips of customers.
The insurance industry has been experiencing a huge impact from adopting digitization in a corporate environment, products and processes, customer engagements, and association with other rivals [5]. Ever since the term “Industrie 4.0” in 2011, this Industry 4.0 version started to receive attention across the globe [6].
“Digitalization is destined to deeply modify the financial and insurance ecosystem, impacting all activities that compose the whole insurance value chain, from product development to pricing/underwriting, sales and distribution, policy and claims management, and asset and risk management” [7].
Digital transformation of industrial and consumer markets is integral to Industry 4.0 [8]. The global digital insurance platform shared a $96.34 billion market share in 2020, and it would be $279.51 billion by 2030 with 11.3% growth at a CAGR from 2021 to 2030 [9]. The 4.0 new insurance version empowers the insurance market players to use the new ecosystem [5]. It aids technology innovations that lead to the creation of nascent products, processes, ways of production, and business themes [10]; the chained computers, smart materials, and interlinked intelligent machines, and decide with less human involvement [11]; increases resources efficiency and waste reduction [12]. Insurance companies can revamp their profit and loss accounts through digitization by lowering costs and generating new avenues of revenue with new business models [13]. As of now, insurance companies that are delaying the transformation of their operation into digital soon will be eliminated by those who have embraced the digital transformation.
Undoubtedly, the digitization of insurance operations welcomes sustainability and endeavors to achieve sustainable development goals highlighted in the United Nations General Assembly in 2015. These set of goals – education, health, social protection, job opportunities, and protection of environmental ecologies – can be achieved with equal participation of governments, the private sector, civil society, and every human being around the world [14]. The previous rich literature has defined sustainability well, and academia has developed three key pillars of environmental, economic, and social sustainability [15–17]. Besides, digital insurance has gradually been bringing down the dependency on paperwork to zero, contributing to sustainable development objective achievement; economically, maximizing work efficiency, generating huge data for more job opportunities, and controlling the wastage of time, money, and cost; socially, covering every remote area, reducing governments’ as well as societies burden of treatments and losses, easy accessibility for all.
Different continents have been slowly transforming their old version insurance sector into a digital one. For instance, Asian insurance companies have increased their investment money in digital capabilities after registering huge disturbances in their operation during the COVID-19 pandemic to assist a digital-hybrid growth model for their traditional distribution mechanism [18]. Likewise, the European Insurance and Occupational Pension Authority have introduced a digital transformation strategy that emphasizes a systematic, balanced, and holistic approach to the European insurance markets [19]. In the USA, the outbreak of the COVID-19 disturbance has pushed the growth of digital insurance in the economy and it has been predicted that it will reach $ 23.92 billion by 2025 [20]. However, the Indian insurance industry is witnessing the slow growth of digital insurance companies. As of now, only ten companies have registered their business as a complete part of the digital world such as Digit insurance, Acko Insurance, PolicyBazaar, RenewBuy, Kneko, Probus, SecureNow, Clinikk, BimaPlan, and Finsall. Another positive side of India’s digital policy is that it is a member of BRICS countries that have been supporting India to enhance the adoption of digital financial infrastructure and ecosystem and ensuring regulatory framework to support digital and financial literacy with a core focus on data protection [21]. As per the Mint [22] latest prediction, India will witness $ 1 trillion as a digital economy by 2025. Following different reports, opinions, and research articles, this research is an attempt to compile the data and report on how digital insurance across the globe assists economies in achieving sustainable goals and ensures sustainability in the present and future of the insurance industry. It is believed that this paper will contribute to creating a roadmap for future research to identify more avenues in digital insurance policies and offer suggestions on improving shortcomings.
To do so, this paper aims at taking a bird’s eye view of the previous research database that covers all the initiatives taken by different regions to transform the traditional insurance industry into a digital industry. First and foremost, we have developed a conceptual framework, and then the products and different features of digital insurance are mapped with sustainable development goals.
1.2 Theoretical Background
1.2.1 Origin and Concept of Digital Insurance
The dawn of digital insurance has been only possible after spatial innovations and upgrades reported in the “Internet of Things.” It was Kevin Ashton who first coined the internet of things in 1999. The whole world, in 1990, registered the first application of the internet of things in coke vending machines to measure the quantity and freezing of coke [23]. Nevertheless, the internet of things has immersed into our routine lifestyle which it includes consumer and long-lasting goods, cars and trucks, industrial and useful ingredients of sensors, internet connectivity, and powerful data analytic capabilities that ensure the transformation of the style of work we do, live and play [24]. According to Bandyopadhyay & Sen [25], this mechanism establishes a new connection that is being widely used for, nowadays, exchanging information and communication between people and things. IoT things have been sprawling their wings [26], and India is no exception to this. As per the report prepared by Chaudhary [27], The Indian government has earmarked $15 billion for its Indian digital reserves and predicted that by the end of 2022 it will reach a record level of $ 560 billion.
1.2.2 The Internet of Things
The internet of things has engulfed every corner of the industry throughout the world because it carries connectivity to internet-like feature that has been developing programmed devices as well as sensors. The IoT will positively bring transformation to the world shortly, networked devices will be its significant part, and it is estimated that networked devices will reach 12.5 billion to 50 billion by 2025 [28]. More surprisingly, ever since the first motor telematics policies were put on sale [29], the IoT has been in the market for the last two decades. On the other hand, at present, the insurance sector is facing some critical issues such as non-transparent operations, non-calculative insurance rates, and users’ low awareness level of insurance rates determined by insurers [30]. The answer to these problems lies in the adoption of IoT in insurance because this includes devices that are used in businesses and healthcare institutions. This era of the Internet of Things connects devices with sensors supported by the Internet that collects, store, and analyze massive amounts of data, and play an unprecedented role in the physical world [31]. This environment creates opportunities for insurance companies to bring innovation in new products, expand the space for distribution channels, and offer support in prediction, prevention, and assistance [28]. At present, the development of the insurance sector under the innovative environment that categorically relies on the IoTs assists in the minimization of risks of premium and cost [32, 33].
The IoT opens new avenues for the insurers to make it easy to issue new policies online; creates an electronic environment where they can set up e-governance at full scale; enables customers to make comparisons online with other companies offering similar types of products and services; and makes it possible for the insurance company to set customer Grievance & Redress Cell embedded with artificial intelligence to resolve all the issues of customers on time. Figure 1.1 displays the Connected Insurance Potentialities of Internet of things in Insurance sector.
Figure 1.1 Connected insurance potentialities. Authors compilation.
1.2.3 Digital Ecosystem for Insurers
A digital ecosystem does not only create value for all but ensures connectivity between its stakeholders, despite being a complex network [34]. It is a combination of technical components such as platforms, haptics, and devices, and from non-technological preview associates with brands, consumers, and brand communities [35]. In other words, it is a group of holistic information technology resources that act as a unit, adding suppliers, customers, trading associates, applications, and third-party data services [36].
“Our philosophy is that we want to be an ecosystem. Our philosophy is to empower others to sell, empower others to serve, making sure that other people are more powerful than us. With our technology, our innovation, our partners – 10 million small business sellers – they can compete with Microsoft and IBM” – Jack Ma, CEO of Alibaba.
The existing Business Ecosystem can be structuralized as well as the efficiency of the communication between internal agents can also be revamped with the Digital Ecosystem [37]. Dozens of companies have fully immersed their business operations into digital ecosystems either created by them or partnered with others. Developing a suitable ecosystem requires a business to study some questions such as, who are their customers; where they come from, what are their demographic traits, what types of products and services they are demanding; how you are suppliers making it possible to meet with demand on time; what is the right time to sale your products and services; more importantly, what matters the most to a customer to buy a product or service at given point of time? For example, Amazon has been using its own Amazon Web Services, Inc. (AWS) not only to supply other companies with infrastructure services but also to use in its allied partners like Amazon Prime Videos, Prime Music, Studio, etc.; because of this subscriber of Amazon services enjoys the privilege of being a prime customer and constantly receiving fast delivery, longer connectivity with Amazon Music, and even able to watch or download movies from the prime library [38].
Today, the insurance industry has switched to an agile cross-linked environment instead of operating its business on its own because being a part of a complex digital ecosystem wants to embark upon the end‐to‐end customer journey [39]. This is happening because external factors such as improved life expectancy, artificial intelligence, better connectivity, and customers’ liking have impacted the insurance industry to join the online platform [40]. Considering the volatility in the business environment, it has rightly been said that “Today, insurers win by offering a product [41], Tomorrow, insurers will win by providing access to prevention and assistance services and offering the right product to the right customer at the right time.” This digital ecosystem can evaluate the traditional business model and consider association with different actors within or outside the industry capable of reshaping insurers’ digital strategies [42]. The power of this dynamic digital insurance ecosystem is blurring the borders of old industries and helping the industry to adopt ecosystems [43]. Thus, each insurer should endorse the importance of ever-increasing customer engagement, expanding the insurance offers, fixing simplification of the process, ensuring process simplification, computerization, and ecosystem relationship [44].
1.2.4 Digital Disruption in the Insurance Industry
The entire financial and insurance ecosystem is destined to be thoroughly changed by digitization [45], and digital technology empowers businesses to transform their business contour and open new avenues for income generation. The 4.0 industrial revolutionary technology such as cloud computing, telematics, smart devices, blockchain based on technology, artificial intelligence, and forecast-enabled models, is one of the most influential and responsible factors that galvanize the entire insurance sector with new features that empowers the insurer to set up new strategies for better communication, information sharing, and insuring [46]. The growth in the digitalization of the insurance sector is the constant result of the constant expansion as well as day-by-day improvement in internet infrastructures and new emerging opportunities in terms of in-use available smart applications, and the changing attitude of customers owing to the regular invasion of digital technology, especially after using such services other than insurance services [47]. As of now, the Insurance sector has started to witness the entry of new age of technologies such as blockchain [84, 85], big data [83] analytics & IoT, and AI entailing machine learning, deep learning, computer vision, and Virtual Reality, etc. [48]. This digital technology disruption in the insurance sector can offer satisfaction of users, minimize cost, and ensures maximum growth, and as per estimation this [41] automation will further help insurers to reduce the cost of claims by up to 30%. These breakthroughs in technologies lead to redesigning the insurance sector with innovative routes to gauge, curb and highlight emerging challenges, revolve around customers, minimize cost, ameliorate performance, and strengthen the process of insuring new products and business models [48]. The disruptive behavior of the digital insurance industry is portrayed in Figure 1.2.
Figure 1.2 Digital disruption in insurance. Author’s compilation.
1.3 Sustainability and Digital Insurance
Nowadays, the word sustainability has been omnipresent in every corner of the corporate world [49]. This word is refined and developed as “sustainability which connects with human needs and ecosystem services without compromising the health of ecosystems” by Callicott & Mumford [50]. The ever-increasing exploitation of scarce resources has drawn the attention of every individual on this planet Earth toward curbing and minimizing this flow to preserve it for the next generation. It is evident that there is a race among all developed and developing economies to scale up their production to become number one in terms of the maximum Gross Domestic Products producer, and this comes at an unbearable cost compromising with purity and stability of ecologies, which further disturbs global temperature and convert it into global warming. For example, many industrial sectors make this possible for their respective economies such as manufacturing, production, and servicing. Undoubtedly, the services sector is one of the dominant players that not only produce massively in GDP but is also one of the leading CO2 emitters in the world. As Ritchie & Roser’s (2020) report [51], the astounding figure of 73.2 % CO2 contribution comes from the energy cum service sector. Hence, it triggers acute apprehensions among all as to how to sustain the growth and minimize the rising rate of CO2 that brings several catastrophes. Considering the importance of every natural resource significant for our survival demands a sustainable approach toward meeting human needs without damaging any part of the environmental ecology.
The insurance industry sub-branch of the service industry was on the trend across the globe before COVID-19 and registered a mean score of 4.7% in the life sector and 3.6% in the non-life sector recorded in 2019 [52]. Undeniably, this sector has started to convert its traditional style into digitization so that it may reduce its negative influence on the environment. Likewise, the inclusiveness of insurance drives progress toward a net-zero economy and a sustainable future [53]. From a customer point of view, PwC Global [2] surveyed that 71% of the consumers do initial research digitally before subscribing to any insurance and 26% of insured people purchased insurance policy though online using a web or mobile device. Considering this growing demand, two third of insurance companies have been bringing forth the latest IT products and solutions regardless of the success story of electronic liability insurance gaining more demand, and insurance companies are continuously investing in new technologies [54]. This digitization mode in the insurance sector has improved customer relationships, reduced interaction time, improved pricing policies, and helped expand the market share [5].
Digitization not only leaves an impact on the profitability goals of any organization under an ever-increasing competitive environment but also impacts the sustainability aspects of business wherein much emphasis is put on global warming and pollution [55]. It is estimated that approximately 75% of the CEOs across all industries have been infusing their money into digital solutions to counter hurdles standing before sustainability because digital technology so a powerful tool that can ensure a sustainable future for insurance companies [56]. There are three significant sides to digital tools and data in which insurers are taking action on sustainability: operations and supply chains; investment portfolios; and products and services they deliver, to enable them to develop as more sustainable businesses [57] It is widely accepted the positive and negative impact of new technology on economic as well as on social connections, especially on the environment but sustainability is impossible to be achieved if communication at international level and knowledge sharing are missed [58].
1.3.1 Principles for Sustainable Insurance
The principles for sustainable insurance set significant guidelines before the world to redesign and improve the cutting-edge risk management system that we need to push renewable energy, food safety, clean water, green cities, and disaster-flexible communities [59]. At present, the gravity of global warming has put every organization, government, and institution on the same track to work together to fight the ever-changing climate order and reduce its influence on societies, the environment, and economies. In the year 2012, the United Nations held a conference on Sustainable Development with the motive chalk out a global framework to address the environmental, social, and governance risks connected with the insurers; as a result [60], The Principles for Sustainable Insurance came out as one of the largest joint treaties between the United Nation and the insurance industry. This attempt has offered four sustainable insurance principles such as inclusiveness of environmental, social, and governance issues; collaboration with our clients and business partners to educate people about environmental, social, and governance challenges, adjusting risk and finding solutions, and working as a team that includes governments, regulators and key stakeholders to nurture action meant for the betterment of society, environment, and government; portraying accountability and transparency for actual implementation in regularly disclosing publicly our progress in implementing the principles [61].
To ensure effective and efficient results from set principles for sustainable insurance United Nations Development Programme has introduced Sustainable Insurance Forum. Currently, it has 36 members across the globe that represent a $5 trillion-plus gross insurance premium representing 92 % of the global insurance market share. The SIF is a trajectory for insurance supervisors and regulators to collaborate to share experiences on sustainability challenges such as climate change [62].
1.4 Digital Insurance and Sustainable Goals
Assessing the true impact of climate change is one of the Hercules tasks for regulators of financial systems despite climate scientists’ serious call to reduce greenhouse gas emissions to escape from uncertain natural disasters [63]. To answer this call, regulators at global, regional, and national levels have been evaluating the uncovered climate risks linked with the insurance however it is required to conduct scenario analysis as well as emphasize more solvency [64]. Moreover, the global climate effect has been locked for at least the next 10 years, and insurance companies are not focusing only on individual cataclysmic events rather they, now, include the engagement between the global climate and human systems [65].
The constant increase in global temperature leads to disturbing the global climate pattern. It has been forcing every individual, business group, government, small, medium, large industry, primary, secondary, and tertiary sector to remodel their operations that should match sustainable goals. In fact, over the last three decades, the changing pattern of weather has made the insurers introduce the Weather Index Insurance concept to cover the risks like drought, flood, and cyclones protecting the interest of customers. This Weather Index Insurance is helping one way to work together with all stakeholders, especially from the primary sector, protecting from heavy losses arising from natural calamities [66–68]. Here, the role of digital transformation of agriculture in terms of enhanced efficiency of the management and the interaction between the industry and the state leads to bringing in agricultural insurance with the application of digital technologies, facilitates the compilation of objective data channelizing of agriculture producers and the state to ensure global planning in the industry [69, 85]. The application of digital insurance in the primary sector not only helps the stakeholders secure themselves from any losses owing to natural calamities but also encourages them to access insurance policies anywhere. Thus, more subscriptions number would give more coverage of losses, and more secure opportunities for farmers to restart their farming if there is any loss. One way this map manages risk and develops solutions is one of the principles of sustainable insurance with sustainable development goals.
Undoubtedly, insurance supports a sustainable business organization with products and services that protects societies from uncertain risks and upgrade the lifestyle, strengthening the confidence level to transform issues into opportunities [59]. The existence of the insurance industry across the globe indicates the security and safety of subscribers of insurance products and services. The insurance sector mushrooming under a digital umbrella enables the industry to match the objectives of insurers with sustainable goals and promote sustainability applications by digitizing the whole business operation; because sustainability offers three significant factors that are widely recognized for the success, safety, and soundness of the insurance sector [70]. Moreover, insurance is an eminently social business, crucial to ensure economic activity’s sustainability [71].
Digitalization is the primary reason why the insurance sector witnessing huge changes inside and outside its business environment [72]; and it offers many solutions to answer many crucial issues such as reducing complete dependency upon paperwork, establishing effective and strong virtual communication between insurers and customers, expanding the coverage in remote areas, enabling individuals to access the insurance products and services with just one click, fast and clear process of redressing the customers’ issues online, issuing new policy and making payment instantly once the policy gets maturity, and introducing virtual assistant everywhere. In other words, insurance companies are now reaching lower costs, lesser error rates, higher client satisfaction, and maximizing online insurance sales [73]. For instance, files are accessible digitally via Cloud, and these can be analyzed using algorithms that ameliorate processing pace and establish accuracy, and these precise reviews not only impact claims but are also more powerful mechanisms for policy administration and risk assessment [74, 82]. In fact, the insurance industry has embraced the new social reality because it empowers the clients, policyholders, and employees to work together to achieve operations efficiency, improved customer experience, and data management [75].
Sustainability goals demand patience, perseverance, and commitment from all stakeholders across the globe; however, the role of digital insurance and the principles of sustainable insurance are truly significant because both are mapped with sustainable development goals to bring balance to the environment and the economy. As per the report on Sustainable Insurance advocates that insurers have already accepted the transition phase of consumer demand keeping in mind how sustainable practices have become key differentiators in an increasingly competitive insurance environment, and in order to get closer to their sustainability ambitions, insurers should focus on six key parameters: strategy, engagement, business models, risk management, greet IT & operations, and data [76].
1.5 Findings
The ever-growing demand to access each and every part of key information related to insurance products and services should be one click away. The digitization of the insurance platform addresses the most significant answers to problems such as how to bring down the paperwork to zero, ensure the complete system is eco-friendly, bring every important stakeholder online, bridge the gap between development in the insurance sector without compromising with natural resources, and how close we can go to ensure sustainable development with insurance sustainability principles [80, 81]. Apparently, the competitive push from innovative technology influences the existing as well as new insurance companies to adopt complete digital working operations. This has given birth to a new digital ecosystem for insurers. However, the insurance sector has been experiencing a slow digital transformation. Yes, it is possible to blend sustainability with the digital world.
1.6 Conclusion
Even though digitization has changed the basic structure of governments, economies, and societies however it cannot be completely ignored that it surfaced serious concerns like jobs, skills, privacy, security, and social inclusion [77]. One major serious concern is coping with ecosystem development [78] because responding to new consumer demands under changing scenarios that insurers are not used to, and thus the policyholder wants end-to-end solutions and establishes alliances with other companies. Digital insurance has also given birth to cyber issues such as self-reporting, external security audits, and the insurer’s refusal to settle claims. This can compromise the harmony of social trust in financial services [79]. Garrido [78] reported that insurers should be more vigilant against threats originating out of digital operations and put customers’ data at stake. Likewise, as per Insure [80] report, this digital transformation outlines five major challenges of insurance companies such as multiple legacy systems, investment of resources, lack of IT expertise, change management, and data management which demand transparent, flexible, and inclusive mechanisms to combat these issues. If these issues are sorted out parallelly considering the transforming digital speed, then society will experience a valuable upgradation in their behavioral intention toward subscription of insurance products and services eventfully it will be a win-win situation.
1.7 Implications
This study highlights the key transforming scenario via the digital platform for insurance companies and explains how being digital can bring forth the merger of sustainability with expanding digital ecosystem.
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