One step closer to Net Zero Car Insurance: learnings from Aviva Zero
Aviva, a leading UK insurance company, has made a commendable commitment to sustainability, with plans to become net zero by 2040. In 2022, they launched Aviva Zero, a pioneering carbon-conscious car insurance product. This move positioned Aviva as a trailblazer in sustainable insurance, setting a precedent for others to follow as the insurance industry recognizes its role in the global journey towards net zero.
However, while Aviva Zero is an innovative step forward, the term "Zero" may be somewhat misleading. The product isn't truly net zero yet, but with some adjustments, it could be!
Sustainability Features of Aviva Zero
Aviva Zero's sustainability features include:
A 5-star Defaqto rating, indicating a comprehensive car insurance policy.
Carbon emissions offsetting based on the car and the yearly mileage reported by the policyholder, covering the first 1,000 miles of carbon emissions for the policy year.
A matching scheme where Aviva matches the policyholder's payment if they choose to offset 50% of their remaining miles, contributing to further carbon offsetting.
Carbon offsetting, achieved through projects that benefit people and communities, aligning with Aviva's commitment to sustainability.
A digital-focused, online-only car insurance product.
While these features are impressive, the real measure of sustainability lies in the emissions produced by policyholders’ vehicles and how they are managed.
Challenges with Aviva Zero
The first challenge is that not all emissions are automatically covered by the insurance. If only the first 1,000 miles are taken into account when the average annual mileage for cars in the UK is between 6,600 to 7,400 miles (10,600 to 11,900 km), then only 13 to 15 % of emissions are covered.
The second challenge is the method of handling emissions. Aviva uses conventional carbon offsets, which are not enough to reach net-zero emissions. Unavoided emissions need to be compensated through carbon removal, which is more expensive than carbon offsetting.
The third challenge is that Aviva Zero does not account for emissions from vehicle repairs and replacements, which can be even higher on an annual level than tailpipe emissions of all insured vehicles in the portfolio.
What Does Truly Net Zero Car Insurance Look Like?
A truly net zero car insurance policy would need to account for two sources of indirect scope 3 emissions:
Emissions caused by the insured car (insurance-associated emissions)
Emissions caused by repairing damages (claims related emissions)
To brand their car insurance as truly net zero, an insurer needs to ensure that all of these emissions are reduced as much as possible and that any remaining emissions are removed.
Sustainability Tools for Insurers
For emissions caused by insured cars, carbon removal will be the main tool until everyone is driving an EV. Insurers may also choose to be selective about what kind of cars they are willing to insure or for what price.
When an insured car (or spare part) is damaged and needs repairing, insurers have several tools to ensure that emissions are minimized. These include product-related tools, such as requiring policyholders to accept a recycled spare part in mint condition instead of a completely new part, and increasing the threshold for total losses.
Conclusions
Aviva’s efforts in sustainable insurance are commendable, but there’s much more that can be done. Insurers can play a major role in combating climate change. Globally, repairs and replacements of insured assets account for 1.7% or 640 million tonnes CO2e of all greenhouse gas (GHG) emissions.
In car insurances, significant carbon emissions arise from two sources linked to the use of the insurance. These are the emissions caused by the insured vehicle and the emissions that stem from repairing or replacing damaged vehicles.
We welcome further discussions on the tools available for an insurer to dramatically lower these emissions and how the roadmap for a truly net zero car insurance could look like.
