ESG reporting is no longer just a buzzword – it’s a pivotal element that could significantly influence your insurance coverage and costs.
As ESG (Environmental, Social, and Governance) reporting becomes increasingly significant, its impact is being felt across all business sectors, including the insurance industry. A recent survey conducted by GrECo Group with a cross-section of international and local Austrian insurance underwriters reveals a strong trend towards integrating ESG considerations into their policies.
ESG reporting is no longer just a buzzword – it’s a pivotal element that could significantly influence your insurance coverage and costs.
Demand for sustainable insurance
In December last year we reached out to you, our clients, to ask what you were looking for in terms of sustainability in relation to insurance. 25% of you said you wanted to have a sustainable insurer and 31% wanted more information about the sustainability of insurance products.
Our recent survey with insurance underwriters shows that the industry is taking ESG requirements seriously and will be, if they’re not already, incorporating more and more sustainable factors into their strategies, solutions and product offerings.
What are the implications for your business?
Our survey found that 70% of insurance underwriters already have, or are planning, a strategy to integrate ESG aspects into the underwriting process. As ESG becomes more interwoven into insurance offerings, companies will be under more comprehensive environmental, social and governance scrutiny by their insurance providers. The bottom line is those who fail to ensure their sustainability efforts are meeting the requirements of their insurer, may find themselves without coverage or facing exorbitant prices.
However, for those who are effectively managing their ESG risks and successfully reporting on the measures they are taking to mitigate against them, there are numerous benefits.
Sustainable investment opportunities
The EU taxonomy addresses sustainable investment and the development of products that promote sustainable behaviour. 75% of the insurance companies surveyed have drawn up a written strategy for sustainability and climate protection within their own company.
Furthermore, our survey found that efforts are being made by underwriters to launch insurance products on the market that promote aspects of sustainability. The current trend here is towards promoting repairs instead of new purchases and promoting e-mobility through premium discounts. The survey results also highlight trends like “build-back-better” solutions and parametric insurance, which offer innovative ways to manage risks and claims.
What this means going forwards is that your organisation will be able to take advantage of innovative insurance products that support your sustainability goals, and that the solutions offered by underwriters can provide your company with more tailored and effective insurance coverage.
Improved claims processing
All of the insurance companies surveyed are using modern modelling techniques and/or digitalisation to enhance claims processing, especially for climate-related risks. For your business the upgrading of these systems increases the transparency of the claims process and ensures prompt and fair claims settlement, which is crucial for companies in the event of a loss.
Support for Decarbonisation Efforts
Historically, risk assessments have often included exclusion criteria, such as not insuring coal mining or oil extraction from oil sands. However, many insurance companies are now considering or developing further refinements to this process. Key ESG factors include the risk of natural disasters and the policyholder’s carbon footprint or decarbonisation strategy.
Over half of the insurance companies surveyed have committed to addressing decarbonisation within their premium volumes, with around a third setting defined targets. The result is insurers are likely to start offering insurance products that support your decarbonization goals, helping you to contribute to a more sustainable future.
Focus on human rights and social responsibility
The insurers also highlighted that they would be paying closer attention to a company’s social responsibilities. According to our survey results, whether or not an organisation is addressing human rights risks is a significant concern. As such, your company can expect insurers to prioritise social responsibility in their analysis which is likely to enhance the reputation and trustworthiness of the insurance products they offer.
Securing a sustainably insured future
In conclusion, our survey findings underscore the importance of ESG considerations for the insurance industry both in their own businesses and in the businesses of the companies they will insure. Companies who commit to sustainable practices and work with their risk advisers to ensure all relevant ESG risks are mitigated could unlock lower premiums, more tailored insurance solutions and enhanced support for their sustainability goals. Embracing these measures not only fosters a more resilient and responsible business environment but also paves the way for long-term success and sustainability. However, failure to meet these evolving standards may result in higher premiums or even a loss of coverage.
Our risk specialists are on hand to help you navigate the transformations taking place in the industry to ensure you are meeting insurers´ targets and expectations whilst securing you the best deals. The clock is ticking; get in touch today!
Sabine Bradac
Risk & ESG Consultant
T +43 664 962 39 57
