Shaping a sustainable future for India: How insurers can help
Achieving India's sustainability imperatives is no small feat - it requires multi-stakeholder cooperation and an ecosystem approach bringing together the public and private sectors, academia, non-profit and multilateral organisations.
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Insurers play an important role in addressing the environmental and social challenges from mitigating climate risk, advancing the energy transition, building societal resilience, and driving affordable insurance with digital solutions. However strong policy support and significant private sector investment is necessary.
Delaying progress on sustainability could have serious social, economic, and environmental implications. India is vulnerable to weather risk and the nation's adaptive capacity for climate change is low – if no mitigating action is taken, the loss to India's GDP could be as high as 35% by 2050. Moreover, productivity losses due to climate change in India could affect an equivalent of 34 million jobs by 2030. Air pollution alone could result in up to 1.64 million annual premature deaths.
In this paper, we specifically elaborate on the key themes that can further India's sustainability agenda. We also show how insurers (and the broader ecosystem) can help across these themes (See Figure 1). These are:
Advancing the energy transition: The insurance industry can assist by helping to improve the bankability of various sustainable projects such as green initiatives targeting the renewables sector; new technologies aimed at making fossil fuel-driven processes more efficient; and carbon-capture processes.
Enabling sustainability of industry sectors: Insurers can partner with industry to establish risk assessment standards and procedures. They can make recycling risks more insurable and facilitate risk transfer in the domain of sustainable mobility.
Mitigating health risks: Insurers can go beyond their traditional role in reducing the health and mortality protection gap. With new and emerging health risks, Insurers can pivot to provide innovative solutions such as offering treatment for mental health disorders and developing specific nature-related preventive and therapeutic measures. They can also reverse the health implications arising from biodiversity degradation by protecting green roofs and forest covers.
Strengthening food and agriculture systems: Insurers can increase accessibility to crop insurance, shielding farmers from both floods and droughts. Weather-based parametric insurance solutions can protect agricultural warehouses from utilisation risk. Insurers can also expand the boundaries of insurability by helping smallholders grow their farms into sustainable, commercially viable businesses.
Developing resilient infrastructure: Insurers can explore coverage options for both construction and operation of green buildings, such as for damage to newly installed energy efficient systems; business interruption due to energy systems failure; and shortfalls in benefits from expected energy savings. The industry can also play its part in restoring investor confidence by identifying and insuring against hitherto unforeseen infrastructure project risks.
Driving affordable insurance with digital solutions: Insurers can partner with satellite vendors to enable remote sensing-based rapid damage assessment after large-scale floods. This will result in faster pay outs and early warnings for business and infrastructure. Technology-based solutions can also aid insurers in cattle identification and crop yield assessments. Innovations such as insurance-backed guarantees can be developed to cover the failure of algorithms if they don’t perform as expected.
For deeper insights, please download the full report.