Report: Policyholders Climate as a Resource ‘Primary Concern’

Advertisements

 

According to a report from Capgemini (a technology services company) and EFMA (an international nonprofit founded by banks and insurance companies), nearly three-quarters of property and casualty insurers consider climate change a “primary concern.” More than 80 percent of individuals and small-commercial clients said they have taken at least one sustainability action in the last year.

The report still found that not enough is being done to address these issues. Only 8 percent of the insurers surveyed were considered “resilience champions”, which was defined as having “strong governance, advanced analysis capabilities, and a strong focus for risk prevention and resilience through their investment and underwriting strategies.”

According to the report, climate change has caused economic losses that have increased by 250 percent over the past 30 years. This is why 73 percent of policyholders stated that climate change was a primary concern, as opposed to 40 percent of insurance companies.

Three policies were recommended by the report that could help in climate resilience among insurers.

  • Climate resilience is an integral part of corporate sustainability. C-suite executives are given clear roles and accountability.
  • The closing of the gap between short-term and long-term goals in a company’s value chain;
  • Designing technology strategies that promote product innovation, customer experience, and corporate citizenship using advances like machine learning or quantum computing

“The climate change impact is forcing insurance companies to play a larger role in mitigating risk,” stated Seth Rachlin, global leader of the Capgemini insurance industry. Insurers that place a high priority on sustainability will make smart, long-term business decisions that will positively affect their future relevance as well as growth. To achieve your goals, it is important to combine innovative risk transfer with risk prevention.

Advertisements

A global problem

The dangers of changing climate patterns are evident in recent floods in South Africa and scorching hot in India, Pakistan and increasingly deadly hurricanes in America. John Berry, Efma CEO, stated that while most insurance companies acknowledge the impact of climate change, more can be done to demonstrate how to create climate resilience strategies. In order to show customers that they are paying more attention to climate change’s impact on their lives, insurance companies need to make sure their offerings reflect this commitment. This will allow them to remain competitive in a changing market and recognize the importance of sustainability.

Data is the key

According to the report, “future-focused insurers” must incorporate climate strategies into their operating models and business models. However, it also states that this requires fundamental changes such as revising the data strategy, focusing more on risk prevention, and moving beyond investment exclusions.

Only 35% of insurers, according to the survey, have used sophisticated data analysis techniques, like pricing and risk models based on machine learning, which is “essential to unlocking new data possibilities and enabling more precise risk assessments.”

Advertisements