Follow the money to understand claims emissions
The insurance industry holds a significant, yet often overlooked, key to combating climate change. Our research reveals that insurance claims payouts contribute to 1.7% of all global emissions. This presents a unique opportunity for insurers to take a proactive stance against climate change and make a substantial impact.
Understanding the emissions trail
To comprehend the impact of claims emissions, we need to trace the flow of payouts, in other words, “follow the money”. Our analysis identifies three primary recipients of these funds:
Suppliers: Entities such as body shops and construction companies that receive payments for services like vehicle repairs or home renovations on behalf of claimants.
Claimants: Individuals or organizations directly compensated to replace or repair lost or damaged items, from vehicles to electronics.
Peers: Other insurers that settle claims on behalf of an insurer due to market standards and inter-company agreements.
Our case studies show that suppliers and claimants each account for a significant portion of the emissions, ranging from 30% to 50%. Peers contribute the remaining percentage, which can be up to 30%.
Influencing emission sources
Insurers have the power to influence all three emission sources, thereby driving significant reductions in the overall carbon footprint of claims processes.
For instance, insurers can influence how repairs are conducted and materials are sourced, guide how claims payments are spent by consumers and companies, and steer how claims are settled by peers, encouraging sustainability in inter-company agreements.
A company-wide opportunity
The outcomes of insurance claims are a result of company-wide decisions, encompassing Claims and Underwriting departments. There is a broad spectrum of opportunities to manage emissions. Some of these opportunities are presented in the table below.
Pioneering industry change
If P&C Insurance has taken an admirable first step in tackling claims emissions by setting science-based targets for suppliers, aiming for 30% of its suppliers to meet these targets by 2028.
This initiative not only highlights the company's dedication to net-zero but also its role in shaping the insurance industry's approach to environmental responsibility.
Conclusion
The path to sustainability lies within innovative strategies and decisive actions. The insurance industry has the ability - and responsibility - to lead the way in reducing emissions.
We encourage insurers to follow the example of If and set quantifiable targets, engage with stakeholders across the supply chain, and innovate insurance products for a more sustainable future.
Start by assessing your company's claims emissions and identifying areas for improvement. Then, set ambitious, science-based targets and work towards achieving them. Remember, every step you take towards sustainability not only benefits the environment but also strengthens your company's reputation and appeal to increasingly eco-conscious consumers. Act now for a greener tomorrow.