Birla Institute of Management Technology (BIMTECH) on its 36th foundation day on October 02, released the Insurance India Report - Series II which highlighted the need for developing insurance markets for climate risk financing. In the chapter on this issue, authored by Arup Chatterjee, Principal Financial Sector Specialist, Finance Sector Office, Asian Development Bank, emphasised that Governments must climate-proof their public finances to avoid an ever-worsening spiral of climate vulnerability and unsustainable debt burdens.
"Targeted taxation can have a real impact when linked to risk reduction and risk transfer activities that private households and firms take. Favourable tax treatment can encourage people to purchase insurance, expand the size of the insurance market, and enhance the ability to pool risk, resulting in lower premiums and less government expenditure after a catastrophe," Chatterjee said.
Meanwhile, the report also said that the environmental, social and governance(ESG) criteria can influence an insurer's operations, investment decisions, product offerings and overall brand reputation.
"Embracing ESG can help insurers manage risks better, identify new growth opportunities, and strengthen their brand reputation. It can contribute to the long-term sustainability and success of insurers in a world where stakeholders increasingly value not just financial performance but also social and environmental impact," Bhargava Dasgupta, MD & CEO, of ICICI Lombard General Insurance Company said in the report.
Natural catastrophes like floods, cyclones, earthquakes and wildfires can lead to massive insurance claims. Insurers need to consider such environmental risks in their underwriting and pricing decisions. They also have a role in promoting environmental sustainability by providing coverage for green technologies like renewable energy and electric vehicles, as per Dasgupta.
According to Dr Abhijit K. Chattoraj, chartered insurer, dean and professor at BIMTECH, the changing profile of insurance buyers will demand more customised products. In the report, he along with Dr Steward Doss, Professor, National Insurance Academy, Pune flagged the lack of research and development by the insurance industry.
"In 2030, India will add 140 million middle-income and 21 million high-income households. These demographic changes would drive the demand and growth of the Indian insurance sector. Insurers must understand these changes and develop appropriate business strategies," Chattoraj said. He also added that the revival of Mutuals as insurance companies can be a game changer in promoting micro-insurance to the nooks and corners of the country with community participation.