The recent United Nations Climate Change Conference (COP26) in Glasgow and the PSI COP26 Sustainable Insurance Series made me think about potential opportunities for insurance companies to mitigate climate change. As an industry, we have talked a lot about how assessment of the risk associated with extreme weather events, such as polar vortices and heat domes, massively affects losses. Accenture research has also shown how important it is for today’s operators to show commitment to important causes, with a majority of millennials and Gen Z consumers prioritizing companies that take a stand on issues that are important to them.
Addressing climate change is not just about environmental sustainability. Insurance managers who take an active role with climate-related initiatives and establish themselves as part of the solution will stand out in the market. We have discovered that environmental, social and governance (ESG) trends are expected to drive a $ 206 billion opportunity over the next five years. As my colleague Kenneth Saldana puts it, “sustainability [has] developed beyond altruism into a new business need. “
Maintaining responsibility and transparency along the way will be crucial for both internal purchasing and customer trust. In this blog, I wanted to explore some ways I see insurance companies go up to take responsibility for combating climate change.
Focus on innovative products that address climate issues
I believe that every insurer has a role to play in reshaping how we approach sustainability inside and outside the company. One of the ways in which insurers can meet customers̵7; demand for sustainable offers and take steps to strengthen sustainable business methods is to provide products and services that directly or indirectly drive a positive environmental impact.
My colleagues Nina Jais and Ravi Malhotra see an opportunity for insurance companies to offer new products such as dismantling, renovation and recycling. They can also offer discounted premiums to customers who choose these options for the assets they have insured, such as vehicles or homes.
Swiss Re recently developed a cutting-edge product that protects the coral reef off the coast of the Yucatan Peninsula – essentially guaranteeing nature. The company collaborated with The Nature Conservancy and regional authorities in Mexico to protect this natural resource as if it were damaged would lead to major economic damage to the region.
Finally, insurance companies can also act as indirect catalysts for change in other businesses. One way is to stimulate sustainable practices by charging premiums related to ESG risk. When it comes to issue guarantees, focusing your portfolio on sustainable companies can also help move the needle on the environmental impact between industries.
Work against net zero emissions within the organization
As we enter a climate-conscious future, organizations in all industries will need to reconsider their energy use and the environmental tax for their operations. The UN Environment Program established the Net-Zero Insurance Alliance (NZIA), a group of over 20 of the world’s leading insurance companies that have committed to shifting their insurance portfolios to net zero emissions by 2050. Members include Zurich Insurance Group, Swiss Re and AXA. North American insurance companies can join NZIA as part of their commitment to make climate-related improvements to their operations.
In 2021, State Farm announced its internal strategy to reduce greenhouse gas emissions by 50% by 2030, expressing a commitment to support the well-being of current and future customers and employees. This goal is a continuation of initiatives they took in 2020, including establishing an Enterprise Environmental Sustainability Team. They also increased paperless invoicing among customers while working to become paperless in the workplace and have removed disposable plastic water bottles from offices around the country.
Improve transparency and accountability around influence
Accenture’s research has shown that 72% of managers in various industries say that it is a top priority to become a truly sustainable business. Further analysis, however, revealed a difference between managers and stakeholders – namely employees – in terms of progress for sustainability initiatives. For example, while 68% of managers believe that they have developed a robust sustainability plan, only 21% of employees say that this commitment goes beyond superficial optics.
These gaps in perception damage stakeholders’ trust. Our research also shows that only 40% of consumers believe that senior leaders “walk the talk” when it comes to sustainable initiatives. This research also showed that a stronger consensus on sustainability performance between managers and stakeholders was also correlated with improved financial performance. With the new generation of consumers prioritizing value-driven companies, insurance companies miss an important opportunity to attract new customers and increase customer loyalty if they ignore responsibility and transparency regarding sustainability.
As Nina Jais mentioned in the latest Efma Accenture webinar on the greener insurance industry, the sustainability trend has been adopted a little later in insurance than in other industries. I believe that North American insurance companies can take a more active role in helping to combat climate change and protect the environment.
Banks like Citi have really accelerated their sustainability over the last two years, managing and tracking their ESG targets and revising their operational structures to encourage people to make those targets a priority. I see potential in following their lead.
Take a look at the United Nations Global Compact – Accenture CEO Study on Sustainability to learn more about what is needed to overcome the climate challenges we currently face while continuing to grow in the business.
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Disclaimer: This content is provided for general information purposes only and is not intended to be used in consultation with our professional advisors.