Fox School of Business clinical professor James Hutchin was recently named a partner of the Willis Research Network, the largest collaboration of academics and the insurance industry, as part of 10 new appointments by the network.
Hutchin’s three-year partnership with the network means a funding grant for a continuation of his study on insurance companies’ view of sustainability and its potential effects on business, on which he will collaborate with Fox researcher Matthew Shea, who the WRN also named a research fellow.
Hutchin and a team of students from the school’s required capstone experience for MBAs, named the Enterprise Management Consulting Practice, or EMC, began the study in 2008 with funding from the United Nations Environment Program Finance Initiative.
The researchers were required to complete a global survey of insurance companies, executives and underwriters ¬– the people who calculate risk. From that survey, Hutchin and his team had to determine “how they viewed sustainability and how their views of sustainability affect the taking of risk and pricing of risk,” he said.
“What we found is, individuals seem to be ahead of their companies in terms of viewing sustainability as important in the insurance industry,” Hutchin added.
During the study for the UNEP, researchers found that individuals working for insurance companies seem more concerned about sustainability than the official policy of the company reflects.
Insurance companies are tied to sustainability issues because when something goes wrong, it is the insurance companies that take the biggest hit financially, Hutchin said.
“If I have a major pollution event, I have the environmental impact, which is obvious,” Hutchin said. “I have the social impact – the stakeholders involved in that environment have been harmed, the people involved. And I have a governance element, [which] says, ‘Somebody’s behaviors were wrong.’”
“Maybe regulatory oversight was lax, or maybe a company practiced bad habits,” he added. “Whatever it may be.”
Researchers found that sustainability works better in companies with policies in place to regulate it, known as climate-wise principals.
“You need a regulatory structure,” Hutchin said. “You need some sort of format for sustainability to work, and in the absence of that, people will go out and create their own.”
The insurance industry has created what it calls, “climate-wise principals,” Hutchin said, which “look at the impacts of climate change.”
The WRN grant will allow the study to continue to look deeper into insurance companies’ views of sustainability.
“What we want to find out is if a company in the insurance industry that operates more sustainability in fact produces better operating financial performance,” Hutchin said.
The study’s expansion will look at a specific line of insurance, explained Hutchin, who said he hopes to eventually apply the study on a broader scale.
“[In completing the UNEP survey,] we found a lot of things we didn’t expect to, and I really hope that happens again,” Hutchin said. “That’s the fun thing to doing research.”
The WRN partnership will also help fund six new projects for the EMC.
Included in the WRN’s list of its 10 new partners are academics from Carnegie Mellon University’s Climate Decision Making Center and the University of Pennsylvania’s Wharton School of Business. The 10 new researchers join four existing U.S. WRN partners from the National Center for Atmospheric Research, Princeton University, the Scripps Research Institute and the University of Colorado.
“I hope we can attract the attention of other insurance companies, and in the process of doing that, I think we can demonstrate that doing the right thing also produces the right financial results,” Hutchin said. “Then, I’m hoping we can help change the world a little bit, or at least some small corner of it.”
Lily Fronden can be reached at firstname.lastname@example.org.