Sustainability in the insurance industry: The status quo and action areas
The insurance industry is in transition. More and more insurers are incorporating sustainability risks into their planning to prepare for the future. It is not only insurers who pursue the claim of “sustainable insurance.” Their customers are expecting it, too.
- Environmental, social and sustainable aspects are also becoming increasingly important in the insurance industry.
- There is pressure not only from regulators or companies but primarily from customers.
- Insurers are already working on the action areas around a sustainable focus, which are far more than mere ESG criteria.
What is sustainable insurance?
Sustainable insurance describes the behavior of insurers to adapt their actions and products to the changed requirements of the environment, politics and consumers. This goes beyond considering social and environmental aspects and includes sustainability criteria of a technological and demographic nature.
While the return, from a customer’s point of view, is still in the top position in the subjective catalog of criteria, as many as 80% of people in Switzerland expect insurance companies to promote sustainability with their actions (BearingPoint, 2021).
In addition, the mood barometer used to survey German, Austrian and Swiss consumers shows that greenwashing is a no-no. Yet, many consumers do not know how far insurance companies’ sustainability efforts have progressed.
Did you know that 75% of all insurers surveyed take sustainability risks into account to make use of opportunities in a targeted manner (BaFin, 2022)?
From the customer’s point of view, transparency and comprehensibility are becoming increasingly important. Insurance companies respond to these needs – they don’t have a choice. Consumers expect it from their providers. The SIA 2019 Sustainability Report also highlights this fact: Of the 32 companies surveyed, 25 stated that they would incorporate the ESG criteria into their decisions (SIA, 2019).
ESG is the acronym for three core areas of sustainable action: Environmental, Social and Governance. From the insurance companies’ perspective, all parties involved – regulators, investors, and customers – require these core areas equally. Therefore, they play a central role.
Around half of the companies surveyed by the German Federal Financial Supervisory Authority (BaFin) already apply the ESG ratings and, by doing so, hope for a transparent assessment of the sustainability of contractual partners and investment objects. The remaining insurers are planning to use the ratings (Fehler! Link reference invalid.).
Die Bayerische and Signal Iduna demonstrate how to do it
In practice, some insurance companies, including the German insurers Signal Iduna and Die Bayerische, already position sustainability in insurance visibly for the outside world to see.
Die Bayerische has even established a separate brand in the insurance market, which exclusively offers sustainable and responsible products: Pangaea Life. The products the company offers meet the ESG criteria and, according to the company, are “100% sustainable.”
Die Bayerische relies on a familiar face to position the Pangaea Life brand in the market for consumers: The former German biathlete, Olympic champion and current TV presenter Magdalena Neuner promotes the company’s products that comply with the UN Principles for Responsible Investment (PRI) as a brand ambassador.
SIGNAL IDUNA has added a sustainably oriented life insurer called SIGNAL IDUNA Lebensversicherung AG. It is the first company in the SIGNAL IDUNA Group to have focused on sustainable principles in all business areas since its establishment. In doing so, it assumes a pioneering role in the Group. One strategic goal is to become a climate-neutral company in all aspects.
Sustainable insurance: The most important action areas and trends
Insurance companies are in a field of tension consisting of several factors. They must consider four core areas in terms of their sustainability strategies:
- The environment: Climate change, the increase in environmental disasters, a loss of biodiversity;
- Demography: Societies are aging increasingly due to declining birth rates and advances in medicine;
- Technology: The digital transformation changes preferences and insurability, and cyber risks are increasing;
- Economics: Retirement planning is exposed due to monetary policy, interest rates are low.
There are three aspects that together can advance insurers’ efforts and counteract this tension in the best possible way:
- Sustainability is not a project or process but part of the corporate culture and strategy.
- Comprehensive platforms such as SDA or initiatives such as FRIDA allow insurers to expand and diversify their portfolios.
- Sustainable customer preferences should and must, in some cases, already be included and documented in sales consultations.
Digital tools (keyword: BSI CRM) and Artificial Intelligence help with the last item in particular and with dealing with the challenges in general. Both are also key pillars of the sustainable insurance topic.
Conclusion: No customers without sustainability
Various surveys and the studies we presented show that hiding from sustainable action and sweeping the issue aside is not an option for insurers. The associated aspects are already far too important for today’s consumers.
Insurers such as Die Bayerische show us how to do it: They focus on responsible, sustainable and ethically correct products. A signpost for the insurance industry.
Would you like to know more about the role of sustainable insurance in customer management? We would be happy to share with you the intriguing use cases that can be derived from your customers’ sustainability preferences. Think cross-selling and upselling opportunities.