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Presentation of the event
The insurance industry offers a powerful engine to implement the climate transition due to its (global) size, its know-how in managing long-term risks and the multiple roles it plays in the economy. Thanks to their expertise in risk pricing and their investment capacities, insurance companies are capable to structurally influence the behaviour of economic players while supporting their development.
At least four levers are available to them. First, insurance companies can reduce the fossil fuel exposure of their underwriting strategies and their investment portfolios. Second, they can reward good ESG practices by developing incentive pricing strategies for certain business sectors. Third, insurers can directly integrate ESG factors by creating a “responsible” and “green” product offering for policyholders. Finally, they can play a role in prevention across their entire value chain, supporting both customers and suppliers in their move towards more sustainable business models.
However, these strategies are confronted to several ethical challenges. First, the multiplication of climatic disasters in certain regions increases insurance premiums to such a level that certain categories of the population are no longer able to insure their property, which fuels a global “insurance protection gap”. The climate crisis therefore entails a risk of exclusion of certain populations. Second, despite calls to stop opening new coal mines or new gas or oil drilling, some insurance companies continue to support these activities, paradoxically reinforcing the same risks that they are trying to reduce. Third, the advent of big data in insurance opens new opportunities: a better understanding of the risks and new and tailor-made solutions. However, this trend may fuel discrimination towards certain societal groups. For example, people living in underprivileged areas may pay higher insurance premiums as they are likely to face higher risks.
The webinar discusses these and several other ethical challenges on insurance companies’ journey to sustainability.