Document Type : English paper for special issue on "climate change & insurance industry"

Authors

• Mohammad Ariamanesh ¹
• shamsolah salami ²

¹ Associate Professor, Department of Geology, Payam Noor University, Tehran, Iran

² Chairman of the Board of Directors of the Natural Disaster Fund

Abstract

EXTENDED ABSTRACT
BACKGROUND AND OBJECTIVES
In recent years, the growing intensity and frequency of natural disasters such as earthquakes and floods have revealed serious weaknesses in traditional building insurance systems. These events not only impose heavy financial burdens on communities but also erode public trust in the effectiveness of existing insurance frameworks. Public–private partnership models, although useful in certain contexts, often struggle with inefficiencies, unequal coverage, and delays in responding to the urgent needs of affected populations.
This research aims to present a new framework that integrates digital innovation with hybrid governance mechanisms, specifically designed for contexts where societies face seismic and flood risks. In Iran, the devastating earthquakes in Bam and Kermanshah, as well as widespread floods in provinces such as Golestan and Lorestan, have shown that conventional insurance systems are unable to provide timely compensation or restore public confidence. These experiences highlight the urgent need for transformative approaches that can strengthen resilience and ensure fairer, faster, and more transparent insurance coverage.
METHODS
The methodological design of this study is based on a comprehensive mixed-methods approach carried out in three interconnected phases. First, a comparative analysis of insurance systems in different countries was conducted to examine governance structures, financial instruments, technological adoption, and private sector participation. Second, multi-criteria decision-making models were applied to incorporate the perspectives of experts from government, industry, and academia. Finally, empirical data from Turkey’s building insurance sector was used to validate the simulations and ensure the robustness of the proposed framework. This approach allowed the study to identify successful practices and adapt them to contexts where earthquake and flood risks are most pressing, without altering the original methodological structure.
FINDINGS
The proposed framework consists of four complementary components that together address systemic inefficiencies.
• Use of remote sensing and satellite imagery: High-resolution technologies enable rapid and accurate damage assessment. In Iran, delays in estimating losses after the Kermanshah earthquake slowed down compensation processes. By applying these technologies, such delays can be minimized, and trust in insurance systems can be strengthened.
• Blockchain-based smart contracts: Automated payment systems enhance transparency and reduce opportunities for fraud. In Iran, policyholders have often expressed frustration with lengthy compensation procedures. Smart contracts can streamline these processes, ensuring that payments are made quickly and reliably, thereby improving satisfaction among insured households.
• Conditional government guarantees: A mechanism in which the state covers part of the losses only if buildings comply with seismic resilience standards creates strong incentives for safer construction. In Iran, many damages from earthquakes are linked to poor compliance with building codes. This conditional guarantee would encourage builders and homeowners to adhere to safety standards, reducing long-term risks.
• Participatory monitoring platforms: A system that enables real-time interaction among stakeholders—government agencies, insurance companies, and citizens—can improve transparency and accelerate recovery. In Iran, the lack of effective communication between these actors has often slowed reconstruction efforts. A participatory platform would foster collaboration, strengthen social trust, and ensure that rebuilding efforts are more efficient and inclusive.
Together, these components form a holistic framework that not only addresses operational inefficiencies but also builds resilience and trust in insurance systems.
CONCLUSION
The findings of this study demonstrate that the strategic integration of digital technologies with innovative governance structures can fundamentally reshape building insurance models in the face of natural disasters. The proposed framework offers practical solutions such as conditional government guarantees, intelligent monitoring platforms, and automated payment systems. These solutions are adaptable to diverse developing economies and can be tailored to the specific needs of each country.
For Iran, implementing such a framework could establish a sustainable and resilient insurance system capable of reducing the economic and social pressures caused by earthquakes and floods. By combining technological innovation with governance reforms, policymakers can design insurance regimes that not only compensate for losses but also rebuild public trust and strengthen national resilience.
This research provides a strong scientific foundation for decision-makers seeking to create robust insurance systems for natural hazards. It also emphasizes the importance of context-specific strategies, as economic, social, and technological differences significantly influence the success of implementation. In Iran, with its diverse climate and wide range of vulnerable regions, the success of this framework depends on close cooperation between government institutions, the private sector, and civil society. Only through such collaboration can an effective insurance system be built—one that not only addresses immediate losses but also contributes to long-term resilience and social stability.
KEYWORDS
Insurance; Earthquake; Flood; Governance; Technology; Monitoring

Keywords

• Insurance
• Earthquake
• Flood
• Governance
• Technology
• Hazard Monitoring

Main Subjects

• Risk management in the insurance industry