Climate change is one of those topics that seems to be on the tips of everyone’s tongues these days. From Greta Thunberg’s work and the climate change protests to a greater focus on green energy sources, everyone is talking about the future health of our planet. For insurers, this topic is especially important.
Climate change will have an especially huge impact on the insurance industry as to weather events, such as storms, occur more regularly and are more serious.
Read on to learn more about the impact we already see on the insurance industry and how insurers can make smart choices for their future.
Climate Change in Brief
Before we dive into how climate change is impacting the insurance industry, let’s talk a little about what climate change is.
The term “climate change” refers to any change in long-term weather patterns. But most of the time when we hear the term, it’s referring to the human impact on our climate.
Carbon dioxide and other gas emissions have been increasing since industrialisation. These greenhouse gases trap heat from the sun in our atmosphere, which keeps our planet warmer.
Higher temperatures can lead to more extreme weather patterns (including colder temperatures in the winter, as well as stronger and more frequent storms), destruction of polar ice, and loss of habitat for many beautiful animal species.
Natural Disasters and Insurance
All of this increased danger from weather-related disasters is already impacting how insurers evaluate risk.
Not only will those along coastlines be more at risk of cyclone damage, but many more homes will also be at greater risk of damage from fires.
Another way to approach the problem is to incentivise customers to protect their homes against likely damage.
Installing cyclone-proof windows or taking measures to fireproof their home, can lower their risk. This can offset some of the increased risks from climate change and assist in keeping rates steady.
Temperature Change and Insurance
The insurance industry is also likely to see a rise in coastal risk thanks to temperature change.
A recent study estimated that the oceans are warming at the same rate as if five atomic bombs were being dropped every second. This is leading to greater risks of coastal flooding, not to mention the extreme weather events.
Insurers need to be prepared to cover more flood-related damage in coastal cities and Health insurers see more incidents of heatstroke as summers get hotter and increase in duration.
Changing Role of Insurers
In the past, insurers’ role has been to provide clients with relief when disaster strikes. But in a world where disaster doesn’t strike so much as steamroll, the role of insurance companies must change. Rather than being reactionary, insurers need to become proactive in helping clients avoid disasters.
Insurance companies can start taking steps now to encourage better environmental practices. Even small investments in clean energy, reduced carbon footprints, and sustainable building can turn into huge savings in the future.
Insurers Role in Reducing Greenhouse Gases
Although insurance is not one of the primary offenders adding greenhouse gases to our environment, they do have an important role to play. For one thing, insurance companies can invest in environmentally-friendly solutions.
Automobile insurers may want to incentivise the development and purchase of electric cars, and home insurers might consider giving customers discounts for installing energy-efficient windows and appliances or solar panels.
Modern insurers can help to funnel money towards companies who are working towards a sustainable world and away from those trying to cling to outdated and damaging practices.
New Types of Insurance
Some new types of insurance will emerge as our climate changes. Green insurance is the largest of these new insurance types, and it’s a wonderfully creative solution for insurers to create the kind of proactive change needed to slow the march of climate change.
In essence, green insurance incentivizes customers to implement green initiatives in their own lives.
Home and business insurance plans might cover the costs of adding new sustainable materials or offer premium discounts for those using clean energy.
Learn More About Climate Change
Climate change is going to impact every area of our lives, from how we build our houses to how we get around. Insurers need to be aware of the additional risks climate change can pose and work out strategies to cope with those risks. With the proper actions now, not only can we keep premiums level, but we can also stop irreversible damage to our planet.
Gallagher Bassett manage claims on behalf of insurers, brokers, government bodies, and self-insured organisations. Enquire about our claims management services and start finding solutions that work for you today.