Today, all businesses and sectors have an obligation to operate at a level that is less harmful to our environment. Indeed, the less harmful, the better. But this is something of a juxtaposition for the motor insurance category, hardly renowned as the last bastion of sustainability.
It’s easy to believe motor insurance, equals emissions, equals one of the bad guys when it comes to protecting our planet. Yet scratch beneath the surface and there are considerable and long-lasting developments happening to address this perception.
Elevating sustainability on the insurer’s agenda
There are both external market forces and internal culture movements elevating sustainability items on the insurer’s agenda. This study by BearingPoint found around 80% of European consumers believe that insurance companies should promote sustainable behaviour with their products. In this context, exactly how sustainability is implemented by insurance companies is very important to many people. For example, Viewsbank asked its consumers if they wanted their insurance company to be environmentally friendly - 81% said they did while 22% of those would be prepared to pay more for a policy that helped protect the planet.
Indeed, sustainability has become such a powerful motivator that, in a competitive marketplace customers are comfortable walking away from companies that don’t follow sustainable practices. Millennials and Gen Z are the most likely to make purchasing decisions based on values and principles. This is one of the many reasons behind the creation of the Sustainable Insurance Forum (SIF). Launched in 2006, the SIF is a global network of insurance supervisors and regulators who are working together on sustainability challenges facing the insurance sector.
It’s clear that becoming more sustainable is a core strategic focus across the industry, but it’s how this is translating to the roads, vehicles and drivers that is exciting.
Positive feedback loop
From a societal point of view, motor insurance is mandatory if you have a vehicle. It means that insurers have to create products that everyone can access in order to cater for the growing swell of people who want to drive in the most sustainable way possible. One of the most telling ways insurers are doing this is by offering usage-based insurance (UBI) policies. One of the main impacts of these types of policy from a sustainability perspective is that seeing fuel usage and carbon emissions that are specific to each driver has shown to inform driver behaviour - much in the same way as we do with our heating at home.
But the advantages of these policies can deliver so much more in the long term. One of the main values in UBI is that it creates a positive feedback loop by collating and analysing driver behaviour data. This can then be used to inform drivers of the best driving routes and times to cut down on waiting or congestion to reduce emissions and improve air quality. All combined to help drivers make educated choices on how to use their vehicles.
More to come
Some insurers are already thinking about how to expand their sustainability propositions. We’re seeing policies that state any courtesy car must be a hybrid or electric vehicle, while others are planting a set number of trees in a loyalty mechanism. Last year it was reported that insurers could replace written-off or stolen petrol cars with electric vehicles as part of a wide-ranging plan to improve sustainability. The Association of British Insurers (ABI) said the plans could "herald a new approach" to the many thousands of claims settled each year.
One such example is Ageas. It saw a 40% increase in green parts use during 2020 and is on track to triple green parts use by 2023 after having to adjust its targets as a result of the pandemic. There are others too. Speaking at a recent event, Phil Ost, head of personal lines, Zurich Insurance Company confirmed its ambition is “to have 25% of premiums connected to sustainable activity and behavior by 2024”.
Sustainability starts with insurance
Nobody connected to the motor industry is under any illusion. We’re not going to go green overnight and there’s a huge volume of work to be done if we are to hit the government's emissions targets.
If we accept that driving is an inevitable part of life for many, we must also be prepared to ensure that it is done in the cleanest way possible. And because you can’t drive without it, that starts with insurance.