Awareness of sustainability issues and environmental impacts is at an all-time high. Retail consumers are increasingly looking to businesses to help them make a difference. Similarly, the commercial sector looks to their insurers to provide economic resilience combined with sustainable solutions.
Insurers have a key role to play in helping to promote more sustainable approaches among consumers to improve climate resilience. Insurers can support policyholders to help homes and businesses adapt and become more resistant to and resilient in the face of environmental perils. In this section, we explore some of the ways in which insurance providers can offer underwriting products that encourage sustainable choices and outcomes for the buyers of insurance. We also set out opportunities for policy interventions that can help the insurance industry build robust knowledge and capabilities in this space, whilst empowering the move towards increased environmental resilience.
Encouraging climate adaptation through resilient reinstatement
Insurers have a role to play in promoting sustainable approaches to climate-resilience, for example, in reducing the impacts of physical, climate change-related events such as flood, wildfires and tropical storms. Insurers can support policyholders in making their homes and businesses more resistant and resilient to environmental perils; however, this is not currently the norm. There are obvious benefits for insurers in this action – more resilient infrastructure, buildings and homes reduce the value of future claims. Likewise, it is beneficial to customers for protecting their properties and livelihoods. Resilient reinstatement, as these measures are collectively termed, is an emerging concept that is increasingly gaining acceptance across the insurance industry. The following are ways in which insurers support sustainable choices on the part of policyholders.
Collaborate in using industry data to form an evidence base for the value of resilience measures
There is a lack of confidence on the part of some policyholders and professionals regarding the extent to which recoverable measures will deliver desired outcomes. Regardless, there are research providing evidence to support the benefits of resilience and show the effectiveness of community-based resilience measures through case studies.[2,3] The challenge is that there is insufficient translation and communication to practitioners and policy makers in a concise, systematic and quantifiable manner. With better forms of evidence base available and accessible to decision makers, this may unlock the opportunity to foster evidence-based decision making and offer lower premiums where resilience measures have been taken, thus further incentivising uptake of such policies.
Communication on resilience measures and their benefits, thus driving the normalisation of resilient reinstatement
Success of integrating resilience reinstatement measures will be dependent on raising awareness of the climate-related risks faced by demand side households and businesses within the supply chain and influencing social attitudes and acceptance towards resilience measures. Communicating the benefits associated with resilient repair to policyholders can be challenging; some will take a long view and seek greater resilience, whilst others may focus entirely on minimising the immediate disruption to their households or businesses.
Choices around enhancing resilience can be made at multiple points, both before and after an event. The inclusion of resilient measures prior to an event, or in recovery, can be facilitated by clear understanding on the benefits of resilience as well as the cost of inaction. All stakeholders – including surveyors, loss adjustors, contractors and all parts of the supply chain - must be informed and educated about the benefits of resilience measures in order for the implementation of resilient reinstatement to be effective.