Some Thoughts on Sustainability, Insurability and Insurance

Abstract

There are clear indications that the present “old” industrial economy needs a serious adjustment to become compatible with the aims of a sustainable society. The main issues involved are the time factor, resource productivity and socio-cultural ecology. -the time factor: sustainability is a long-term societal vision concerned with the stewardship of natural resources and assets in order to safeguard the opportunities and choices of future generations. The industrial economy is often limited to a short-term optimization of throughput in monetary terms. Changing course towards a more sustainable society means to introduce the indeterministic time factor into economic thinking, which again implies an indeterministic vision of economics and the capability to deal with uncertainty. -resource productivity: in the present industrial economy, micro- and macro-economic success is directly coupled with resource flows (flows of matter and energy), due to its linear structure. The per capita resource consumption of this system cannot be generalized to the less developed countries without a world system collapse. In order to become sustainable, industrial economies must operate at a much higher level of resource productivity, i.e. be able to produce the same utilization value out of a greatly reduced resource throughput1. This change of course can be achieved by decoupling economic success and resource throughput - one way to do this is to change to a service economy, in which the measure of success refers to the performance of assets (stocks) instead of flows, and to stock utilization (Giarini and Stahel, 1989/93). - social and cultural ecology: the industrial economy has been largely technology-focused, using monetarized values as its main yardstick. A sustainable society is result-focused and based on social and cultural values (non-monetary assets), as well as economic values. Changing course towards a more sustainable society means to take into account social and cultural factors as peers to economic ones. The role of money still needs to be better understood and accepted, but the creation of wealth will increasingly depend on nonmonetarized assets and activities. This adaptation corresponds to a fundamental change, or paradigm shift, as the objectives of a service economy are quite different from those of an industrial economy: to maintain or increase total wealth and welfare, i.e. the monetary and non-monetary assets of society, over long periods of time. Its focal point is the optimization of utilization, i.e. of the performance and the results achieved with goods, rather than the goods themselves. The central notion of economic value in the service economy is the value of utilization over time, in contrast to the momentary value of exchange at the POS (point of sale) in the industrial economy (the added value system is only a subsystem of a larger economic concept). Similarly, quality in the service economy is defined as long-term optimization of system functioning, not as a momentary quality at the POS. For this paradigm shift towards a sustainable society, new tools are needed to control liabilities and simultaneously speed up innovation in commercial and technical areas, and to provide benchmarks for assessing new solutions. Insurance is maybe the only quick way to provide free-market safety nets for real innovation, and the concept of insurability is probably the most efficient free market assessment tool to chose between different options. This means that insurance and insurability could play a key role in the transition towards sustainability. But as a higher resource productivity also induces reduced costs (the “double dividend” of reduced resource procurement costs and reduced waste costs), insurance could even be the hidden joker to achieve a higher and greener economic competitiveness. Today, only few people in insurance, politics or the economy are aware of these links and opportunities, which this paper will try to show.