Unbelievable practices for environmental sustainability abound.
In a recent focus report by the 2021 Customer Monitor Insurance, it has been revealed that the insurance industry is lagging behind other sectors in prioritizing sustainability. The report, summarised within search results, attributes this lag to regulatory gaps, challenges in addressing escalating climate risks, and a slower evolution in risk perception among insurers.
One of the key issues highlighted is the lack of transparency and actionable commitments from insurers. A report by Ceres mentions that only 29% of insurers disclose actionable climate targets, with 59% lagging on emissions reduction and related metrics. This lack of disclosure slows the industry's sustainability prioritization.
The insurance sector is also grappling with a complex regulatory environment that is only recently beginning to mandate climate stress testing and greater alignment with scientific benchmarks. This evolving regulatory landscape is proving challenging for insurers, delaying more proactive sustainability integration compared to other sectors.
Another factor hindering the insurance industry's sustainability efforts is limited customer demand for climate-focused insurance products. There is a reluctance or slow client appetite to pay for insurance products that incorporate new climate risks like heat stress or water scarcity, which limits demand-driven innovation in sustainable insurance solutions.
Insurers also face difficulties quantifying and modeling emerging climate risks with the precision needed for pricing and risk management, which slows the embedding of sustainability considerations into underwriting and product design.
The report further reveals that only 13% of consumers would accept higher costs for sustainable insurance offerings. However, 48% consider sustainability to be of fundamental importance in their lives, while 51% consider it to be of only moderate or low importance. Only 51% of consumers expect the same from insurance companies.
Despite these challenges, the study aims to provide relevant insights into the challenge insurers face in balancing sustainability efforts and avoiding perceived marketing. The findings suggest that the idea of sustainability alone is not enough to influence consumer behavior. There is a need for action in demonstrating the benefit of sustainable insurance products.
The study assesses the attitudes and expectations of insurance customers and the sustainability activities of insurers. It was conducted by analysts from the consulting firms Sirius Campus in Cologne and Aeiforia in Montabaur.
Insurers' internal sustainability activities are particularly well-received by respondents. More than half of consumers find insurers' internal sustainability measures credible and effective. Martin Gattung, founder and CEO of Aeiforia, adds that the benefit of sustainability must be apparent in everyday life for it to be widely accepted.
The preference for local solutions in claims handling is not widely supported. Christoph Müller, CEO and founder of Sirius Campus, states that insurers must respond to growing calls for sustainability with concrete, targeted actions.
The findings are from the 90-page "Sustainability" focus report from the 2021 Customer Monitor Insurance. The report also highlights that sustainability is much more important for food, energy supply, and vacation travel compared to the insurance industry. There is a need for action in demonstrating the benefit of sustainable insurance products.
In conclusion, the industry’s prioritization of sustainability is hampered by regulatory gaps, historical under-disclosure of climate risks, challenges in climate risk modeling, and limited customer demand for climate-focused insurance products, resulting in slower adoption than other sectors.
- The finance sector, including personal-finance and wealth-management, could play a significant role in promoting sustainable living by disclosing actionable climate targets and encouraging customers to prioritize sustainable choices.
- Home-and-garden businesses, in alignment with sustainable-living, could develop innovative products that address emerging climate risks, catering to the growing client demand for environmentally-friendly solutions.
- Education-and-self-development platforms can help bridge the knowledge gap in understanding climate risks and their impact on various sectors, including business and personal-finance.
- Businesses across industries, especially insurers, need to develop and communicate the benefits of sustainable practices to customers for personal-growth and broader societal impact, as revealed in the 2021 Customer Monitor Insurance report.
- Regulatory bodies must consider implementing stricter regulations on the insurance industry to ensure a more proactive approach towards integrating sustainability into risk management and underwriting processes.
