By Max Dorfman, research writer, Triple-I (2022-08-06)
Nearly three-quarters of property and non-life policyholders consider climate change a “primary concern”;, and more than 80 percent of private and small commercial customers say they have taken at least one major sustainability measure in the past year, according to a report by Capgemini, a technology service and consulting companies, and EFMA, a global non-profit organization established by banks and insurance companies.
Nevertheless, the report found that insufficient measures are being taken to combat these problems, with only 8% of the insurance companies surveyed considering “resilience champions”, which the report defined as possessing “strong governance, advanced data analysis capacity, a strong focus on risks” . prevention and fostering resilience through their insurance and investment strategies. “
The report emphasizes the economic losses associated with the climate, which it says has increased by 250 percent over the past 30 years. With this in mind, 73 percent of policyholders said they believe climate change is one of their main concerns, compared to 40 percent of insurers.
The report recommended three policies that can help create climate resilience among insurance companies:
- Making climate resilience part of corporate sustainability, with C-suite executives assigned clear roles of accountability;
- To reduce the gap between long-term and short-term goals across a company’s value chain; and
- Redesign of technology strategies with product innovation, customer experience and corporate citizenship, using advances such as machine learning and quantum computing
“The consequences of climate change are forcing insurance companies to step up and play a bigger role in reducing risks,” said Seth Rachlin, global leader in the insurance industry for Capgemini. “Insurance companies that prioritize focus on sustainability will make smart long-term business decisions that will positively impact their future relevance and growth. The key is to match innovative risk transfers with risk prevention and assign responsibilities within a management team to ensure goals are top of mind.”
A global problem
Recent floods in South Africa, scorching heat in India and Pakistan and increasingly dangerous hurricanes in the United States all exemplify the dangers of changing climate patterns. As Efma CEO John Berry said: “While most insurance companies recognize the impact of climate change, there is more to be done in terms of demonstrative measures to develop climate resilience strategies. As customers continue to pay attention to the impact of climate change on their lives, insurers need to highlight their own commitment by developing its offerings to both recognize the fundamental role of sustainability in our industry and to remain competitive in an ever-changing market. ”
Data is the key
The report says that it is important for “future-focused insurance companies” to embed climate strategies in their business and business models, but it adds that it requires “fundamental changes, such as revising the data strategy, focusing on risk prevention and going beyond exclusions in issue guarantees and investments.”
The report finds that only 35 percent of insurance companies have adopted advanced data analysis tools, such as machine learning-based pricing and risk models, which it called “important for unlocking new data potential and enabling more accurate risk assessments.”