Index Insurance in a Changing Climate: The Dual Role in Economic Efficiency and Social Equity in Developing Countries

This study explores the utility impact of index insurance in developing countries under the background of climate change through a literature review, with a focus on analyzing from two dimensions: economic effects and social equity effects. In terms of economic effects, index insurance significantly reduces transaction costs, enhances the efficiency of claims settlement, and effectively curbs moral hazard. The social equity effect is reflected in its risk protection for highly vulnerable groups and its balancing role against downside risks. The research also points out that there are still limitations in these two aspects, such as insufficient coverage and universal accessibility issues. Finally, this paper proposes suggestions such as being courageous in technological innovation, enhancing cooperation among systems, and improving product design to enhance the practicality and fairness of index insurance in addressing climate risks. The innovation of this study lies in systematically integrating the dual utility of index insurance in the economic and fairness dimensions, and comprehensively analyzing its limitations and applicable conditions based on literature, providing theoretical references and practical directions for subsequent empirical research and the formulation of climate-adaptive insurance policies.