Green Insurance: A Roadmap for Executive Management

Abstract

Anthropogenic climate change is accelerating, and severe and widespread consequences are expected in many areas. Although the insurance sector is not closely associated with any of the sustainability dimensions, expectations may change rapidly. Against this background, we analyze the role of insurers, especially in the property and casualty areas, in addressing the environmental and climate risk challenges and developing a truly sustainable, environmentally friendly business model—green insurance. Building on the Principles of Sustainable Insurance set by the United Nations, we develop a comprehensive roadmap along the insurance value chain for executive management to design their company’s sustainability efforts, with special focus on property and casualty. The roadmap indicates actions to be taken as well as metrics to be managed in product development, marketing and sales, risk management and underwriting and operations and claims management towards green insurance. The existing products, risk appetite and operational processes must be reviewed to support sustainability goals and include the full portfolio of activities, including claims. The time to act is now, the sustainability journey is complex and the proposed business model transformation should provide benefits for early movers.

A systematic literature review on sustainability issues along the value chain in insurance companies and pension funds

“…With the goal of identifying and monitoring ESG issues in business operations, insurers need consistent corporate strategy at the board and executive levels. The strategy must integrate sustainability into all business areas and the corporate culture, and determine appropriate quantitative indicators to measure progress [ 81 ].…”

“…Some insurance companies have developed “green” insurance products and features. Examples include the coverage for electric and hydrogen vehicles, discounts for low- and zero-emission vehicles, and for policyholders who use public transportation, repair rather than replace, and coverage for sharing mobility [ 81 ]. Other examples contributing to environmental sustainability include electric cars and renewable energy solutions [ 45 ].…”

“…In addition, the lack of common definitions and standards for measuring the contribution of products and services to climate change mitigation and adaptation may increase the risk of greenwashing [ 23 ]. One suggestion to avoid the image of using greenwashing as marketing is to apply standards, best practice and established measures (see, e.g., the Science-Based Target initiative, SBTi, [ 73 ], and [ 81 ]).…”

“…Mitigation and prevention of disasters can range from reducing risk exposure to creating institutions for better response, such as land use and emergency planning [ 50 ]. An interesting five-step roadmap for risk management, aimed primarily at small and medium-sized insurance companies, has been proposed by Stricker et al [ 81 ], and consists of integrating sustainability into risk assessments, reviews of risk objectives, setting tolerance levels, risk monitoring and reporting, and external environment monitoring.…”

“…To study the research areas covered by the retrieved corpus of literature and to more systematically assess extant research and potential gaps, we introduce a classification of key insurance sector activities guided by the PSI [ 86 ] and using previous works linking an insurer’s value chain processes to sustainable development (see, e.g., [ 45 , 81 ]). The first principle of the PSI encompasses the strategy and the operations of an insurance company.…”