Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review

Wing Yan Lee; Derrick W. H. Fung

doi:10.29333/ejosdr/13634

Full Text (PDF)

Wing Yan Lee ¹ ^* , Derrick W. H. Fung ¹

More Detail

¹ Department of Mathematics, Statistics and Insurance, The Hang Seng University of Hong Kong, Hang Shin Link, Siu Lek Yuen, HONG KONG^* Corresponding Author

Abstract

Despite the fact that green insurance makes up a significant portion of green finance, there is a lack of systematic understanding and analysis on the international green insurance market in the literature. In this paper, we study how the market for green insurance has evolved and discuss the current challenges. The important elements promoting sustainable growth in the market include universal consensus on the definition of green insurance, an optimal regulatory framework, technological advancement, and talent nurturing, and rising social acceptance. We apply the institutional framework to explore the future direction of market reform for a sustainable market. Reinforcing the three institutional pillars will help to address the current deficiencies in the market. The pollution liability market in China is examined as a case study. This paper gives insight to both academic and industry fields on drivers and challenges in the increasingly complex and fast-growing green insurance market.

Keywords

Green insurance
sustainability
climate change
pollution liability insurance
institutional pillars

License

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Article Type: Review Article

EUR J SUSTAIN DEV RES, Volume 7, Issue 4, 2023, Article No: em0235

https://doi.org/10.29333/ejosdr/13634

Publication date: 03 Sep 2023

Article Views: 829

Article Downloads: 1017

Open Access References How to cite this article

References

Akomea-Frimpong, I., Kukah, A. S., Jin, X., Osei-Kyei, R., & Pariafsai, F. (2022). Green finance for green buildings: A systematic review and conceptual foundation. Journal of Cleaner Production, 356, 131869. https://doi.org/10.1016/j.jclepro.2022.131869
Alexander, E. A. (2012). The effects of legal, normative, and cultural-cognitive institutions on innovation in technology alliances. Management International Review, 52(6), 791-815.https://doi.org/10.1007/s11575-011-0123-y
Allied Market Research. (2021). Renewable energy market by type (hydro-electric power, wind power, bioenergy, solar energy, and geothermal energy) and end use (residential, commercial, industrial, and others): Global opportunity analysis and industry forecast, 2021-2030. Allied Market Research.
Baerenklau, K. A. (2005). Some simulation results for a green insurance mechanism. Journal of Agricultural and Resource Economics, 30(1), 94-108.
Bian, Y., Yang, C., Zhao, J. L., & Liang, L. (2018). Good drivers pay less: A study of usage-based vehicle insurance models. Transportation Research Part A, 107, 20-34. https://doi.org/10.1016/j.tra.2017.10.018
Brockett, P. L., Golden, L. L., & Aird, P. R. (1990). How public policy can define the market-place: The case of pollution liability insurance in the 1980s. Journal of Public Policy and Marketing, 9(1), 211-226. https://doi.org/10.1177/074391569000900115
Bruton, G. D., Ahlstorm, D., & Li, H.-L. (2010). Institutional theory and entrepreneurship: Where are we now and where do we need to move in the future? Entrepreneurship Theory and Practice, 34(3), 421-440. https://doi.org/10.1111/j.1540-6520.2010.00390.x
Che, X., Liebenberg, A., & Xu, J. (2021). Usage-based insurance–Impact on insurers and potential implications for InsurTech. North American Actuarial Journal, 26(3), 428-455. https://doi.org/10.1080/10920277.2021.1953536
Chen, H., Yao, M., & Chong, D. (2019). Research on institutional innovation of China’s green insurance investment. Journal of Industrial Integration and Management, 4(01), 1950003. https://doi.org/10.1142/S2424862219500039
Chen, S., Ding, X., Lou, P., & Song, H. (2022). New evidence of moral hazard: Environmental liability insurance and firms’ environmental performance. Journal of Risk and Insurance, 89(3), 581-613. https://doi.org/10.1111/jori.12380
Desalegn, G. (2023). Insuring a greener future: How green insurance drives investment in sustainable projects in developing countries? Green Finance, 5(2), 195-210. https://doi.org/10.3934/GF.2023008
DeVuyst, E. A., & Ipe, V. C. (1999). A group incentive contract to promote adoption of best management practices. Journal of Agricultural and Resource Economics, 24(2), 367-382.
Dubey, R., Gunasekaran, A., Childe, S. J., Blome, C., & Papadopoulos, T. (2019). Big data and predictive analytics and manufacturing performance: Integrating institutional theory, resource-based view and big data culture. British Journal of Management, 30(2), 341-361. https://doi.org/10.1111/1467-8551.12355
Feng, Y., Mol, A. P. J., Lu, Y., He, G., & van Koppen, C. S. A. (2014b). Environmental pollution liability insurance in China: In need of strong government backing. Ambio, 43(5), 687-702.https://doi.org/10.1007/s13280-013-0436-0
Feng, Y., Mol, A. P. J., Lu, Y., He, G., & van Koppen, C. S. A. (2014a). Environmental pollution liability insurance in China: Compulsory or voluntary. Journal of Cleaner Production, 70, 211-219. https://doi.org/10.1016/j.jclepro.2014.02.027
Foggan, L. A., & Gridley, M. J. (2014). Issues in coverage for preexisting pollution conditions under pollution liability insurance policies. Environmental Claims Journal, 26(2), 91-106. https://doi.org/10.1080/10406026.2014.899806
Gatzert, N., & Kosub, T. (2016). Risks and risk management of renewable energy projects: The case of onshore and offshore wind parks. Renewable and Sustainable Energy Reviews, 60, 982-998. https://doi.org/10.1016/j.rser.2016.01.103
Gatzert, N., Reichel, P., & Zitzmann, A. (2020). Sustainability risks & opportunities in the insurance industry. Zeitschrift für die Gesamte Versicherungswissenschaft [Journal for the Entire Insurance Science], 109, 311-331. https://doi.org/10.1007/s12297-020-00482-w
Golnaraghi, M. (2018). Climate change and insurance industry: Taking action as risk managers and investors. Perspectives from C-level executives in the insurance industry. Geneva Association. https://www.genevaassociation.org/publication/climate-change-and-environment/climate-change-and-insurance-industry-taking-action-risk
Guo, H. (2016a). International experience of environmental pollution liability insurance. Journal of Management and Strategy, 7(1), 59-64. https://doi.org/10.5430/jms.v7n1p59
Guo, H. (2016b). Research on the way of promoting environmental pollution liability insurance in China. International Journal of Business Administration, 7(1), 26-32. https://doi.org/10.5430/ijba.v7n1p26
Ho, C.-C., & Huang, C.-Y. O. (2018). Analysis of the factors influencing sustainable development in the insurance industry. Corporate Social Responsibility and Environmental Management, 25(4), 391-410. https://doi.org/10.1002/csr.1467
Huang, Y., & Meng, S. (2019). Automobile insurance classification ratemaking based on telematics driving data. Decision Support Systems, 127, 113156. https://doi.org/10.1016/j.dss.2019.113156
Insurance Association of China. (2021). Insurance industry focuses on carbon peak and carbon neutrality goal boosts green development blue book. http://www.iachina.cn/art/2021/6/12/art 22 105126.html
IPCC Sixth Assessment Report. (2022). Climate change 2022: Impacts, adaptation and vulnerability. https://www.ipcc.ch/report/ar6/wg2/
IPCC. (2018). Global warming of 1.5 °C. An IPCC special report on the impacts of global warming of 1.5̊ °C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. https://www.ipcc.ch/sr15/
Javernick-Will, A. N., & Scott, W. R. (2010). Who needs to know what? Institutional knowledge and global projects. Journal of Construction Engineering and Management, 136(5), 546-557. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000035
Kirillova, N., Pukala, R., & Janowicz-Lomott, M. (2021). Insurance programs in the renewable energy sources projects. Energies, 14(20), 6802. https://doi.org/10.3390/en14206802
Kshetri, N. (2020). The evolution of cyber-insurance industry and market: An institutional analysis. Telecommunications Policy, 44, 102007. https://doi.org/10.1016/j.telpol.2020.102007
Li, W., & Li, D. (2012). Environmental information transparency and implications for green growth in China. Public Administration and Development, 32(3), 324-334. https://doi.org/10.1002/pad.1626
Li, X., Ozturk, I., Ullah, S., Andlib, Z., & Hafeez, M. (2022). Can top-pollutant economies shift some burden through insurance sector development for sustainable development? Economic Analysis and Policy, 74, 326-336. https://doi.org/10.1016/j.eap.2022.02.006
Lv, C., Bian, B., Lee, C.-C., & He, Z. (2021). Regional gap and the trend of green finance development in China. Energy Economics, 102, 105476. https://doi.org/10.1016/j.eneco.2021.105476
Mateo-Marquez, A. J., Gonzalez-Gonzalez, J. M., & Zamora-Ramirez, C. (2021). Components of countries’ regulative dimensions and voluntary carbon disclosures. Sustainability, 13, 1914. https://doi.org/10.3390/su13041914
Meyer, J., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83, 340-363. https://doi.org/10.1086/226550
Nie, P.-Y., Chen, Y.-H., Yang, Y.-C., & Wang, H. (2016). Subsidies in carbon finance for promoting renewable energy development. Journal of Cleaner Production, 139, 677-684. https://doi.org/10.1016/j.jclepro.2016.08.083
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678
Olubunmi, O. A., Xia, P. B., & Skitmore, M. (2016). Green building incentives: A review. Renewable and Sustainable Energy Reviews, 59, 1611-1621. https://doi.org/10.1016/j.rser.2016.01.028
Pinney, C., Lawrence, S., & Lau, S. (2019). Sustainability and capital markets–Are we there yet? Journal of Applied Corporate Finance, 31(2), 86-91. https://doi.org/10.1111/jacf.12350
PSI. (2012). Principles for sustainable insurance. UNEP Finance Initiative. https://www.unepfi.org/psi/wp-content/uploads/2012/06/PSI-document.pdf
Redelbach, M., Ozdemir, E. D., & Friedrich, H. E. (2014). Optimizing battery sizes of plug-in hybrid and extended range electric vehicles for different user types. Energy Policy, 73, 158-168. https://doi.org/10.1016/j.enpol.2014.05.052
Richardson, B. J. (2002). Mandating environmental liability insurance. Duke Environmental Law and Policy Forum, 12(2), 293-329.
Scott, W. R. (2004). Institutional theory: Contributing to a theoretical research program. In K. G. Smith, & M. A. Hitt (Eds.), Great minds in management: The process of theory development (pp. 460-484). Oxford University Press.
Scott, W. R. (2013). Institutions and organizations: Ideas, interests, and identities. SAGE.
Shao, L., Yang, J., & Zhang, M. (2017). Subsidy scheme or price discount scheme? Mass adoption of electric vehicles under different market structures. European Journal of Operational Research, 262(3), 1181-1195. https://doi.org/10.1016/j.ejor.2017.04.030
Sliwinski, A., & Kurylowicz, L. (2021). Usage-based insurance and its acceptance: An empirical approach. Risk Management and Insurance Review, 24, 71-91. https://doi.org/10.1111/rmir.12165
Street, J. H. (1987). The institutionalist theory of economic development. Journal of Economic Issues, 21(4), 1861-1887. https://doi.org/10.1080/00213624.1987.11504725
Stricker, L., Pugnetti, C., Wagner, J., & Roschmann, A. Z. (2022). Green insurance: A roadmap for executive management. Journal of Risk and Financial Management, 15(5), 221. https://doi.org/10.3390/jrfm15050221
Tselentis, D. I., Yannis, G., & Vlahogianni, E. I. (2017). Innovative motor insurance schemes: A review of current practices and emerging challenges. Accident Analysis and Prevention, 98, 139-148. https://doi.org/10.1016/j.aap.2016.10.006
United Nations. (2020). UNEP’s principles for sustainable insurance initiative. https://www.unepfi.org/psi/underwriting-esg-risks/
Wang, C., Nie, P.-Y., Peng, D.-H., & Li, Z.-H. (2017). Green insurance subsidy for promoting clean production innovation. Journal of Cleaner Production, 148, 111-117. https://doi.org/10.1016/j.jclepro.2017.01.145
Wang, J., Guo, Q., Wang, F., Aviso, K. B., Tan, R. R., & Jia, X. (2021a). System dynamics simulation for park-wide environmental pollution liability insurance. Resources, Conservation and Recycling, 170, 105578. https://doi.org/10.1016/j.resconrec.2021.105578
Wang, W., Tian, Z. Xi, W., Tan, Y. R., & Deng, Y. (2021b). The influencing factors of China’s green building development: An analysis using RBF-WINGS method. Building and Environment, 188, 107425. https://doi.org/10.1016/j.buildenv.2020.107425
Yi, Y., Liu, H., Guo, Q., & Jia, X. (2020). Environmental pollution liability insurance to promote environmental risk management in chemical industrial parks. Resources, Conservation and Recycling, 152, 104511. https://doi.org/10.1016/j.resconrec.2019.104511
Yu, E. P.-Y., Luu, B. V., & Chen, C. H. (2020). Greenwashing in environmental, social and governance disclosures. Research in International Business and Finance, 52, 101192. https://doi.org/10.1016/j.ribaf.2020.101192
Zhou, L., Du, S., Zhu, H., Chen, C., Ota, K., & Dong, M. (2019). Location privacy in usage-based automotive insurance: Attacks and countermeasures. IEEE Transactions on Information Forensics and Security, 14(1), 196-211. https://doi.org/10.1109/TIFS.2018.2848227

How to cite this article

APA

Lee, W. Y., & Fung, D. W. H. (2023). Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review. European Journal of Sustainable Development Research, 7(4), em0235. https://doi.org/10.29333/ejosdr/13634

Vancouver

Lee WY, Fung DWH. Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review. EUR J SUSTAIN DEV RES. 2023;7(4):em0235. https://doi.org/10.29333/ejosdr/13634

AMA

Lee WY, Fung DWH. Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review. EUR J SUSTAIN DEV RES. 2023;7(4), em0235. https://doi.org/10.29333/ejosdr/13634

Chicago

Lee, Wing Yan, and Derrick W. H. Fung. "Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review". European Journal of Sustainable Development Research 2023 7 no. 4 (2023): em0235. https://doi.org/10.29333/ejosdr/13634

Harvard

Lee, W. Y., and Fung, D. W. H. (2023). Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review. European Journal of Sustainable Development Research, 7(4), em0235. https://doi.org/10.29333/ejosdr/13634

MLA

Lee, Wing Yan et al. "Current deficiencies and reinforcement of institutional pillars for reform in the green insurance market: A systematic review". European Journal of Sustainable Development Research, vol. 7, no. 4, 2023, em0235. https://doi.org/10.29333/ejosdr/13634