As the demands for climate action intensify, insurers are also stepping up their game and trying to find pathways towards net zero. When we talk to people at insurance companies, their concerns and hindrances on this topic largely stem from a sense of lack of alignment.
Specifically, there seems to be three key alignment challenges in the insurance industry around climate action:
- Organizational alignment
- Reporting alignment
- Data alignment
In this article we will briefly discuss each alignment challenge and propose some solutions on how to handle them.
As a relatively new topic the internal competence and agreements on objectives vary significantly between key stakeholders in an insurance company.
Quite often there is a sustainability organization at the corporate center level relentlessly working on transferring skills and competences to the operational line organization, as well as to the remaining corporate center units.
This work requires significant time and effort, and is considered absolutely crucial in order for the insurer to be able to install meaningful actions in the core functions of customer offering, sales/marketing, underwriting, claims, and investments.
In addition to aligning objectives between the organizational units of an insurer, there is a need for sustainability – and financial reporting to be back to back.
This concerns not just external reporting, but also internal target setting, resource allocation and follow-up.
The carbon footprint must to be transformed from CO2e to monetary amounts in order to align sustainability with all other activities going on in an insurance company.
There is a vast amount of external data sources, standards, initiatives, and frameworks in this domain. This can be confusing and creates challenges when these external data sources are to be connected with internal data.
This can easily lead to challenges linked to data interpretation and quality.
How to solve the alignment asks?
We believe that the best way to solve these alignment challenges is through firm leadership around climate targets and actions, starting from the board level. A top-down approach must, however, be combined with a bottom-up approach, consisting of information gathering and granular actions near the customer and core insurance processes.
Specifically an insurer should consider the following key questions:
- Is there a clear strategy in place as with regard to climate change? If so, is this strategy well understood and embraced by the whole organization?
- Is there hard quantitative information available for decision making and for internal/external information sharing?
It’s encouraging to see that more and more insurers are raising their ambition level regarding climate actions, and if you would like to learn more about how to measure and track the emissions that matter the most, please don’t hesitate to contact us at firstname.lastname@example.org.