How Can Insurance Companies Help Halt Climate Change?
Image credit: Forum for the Future
Insurance isn't the first industry people think about when talking about business and climate change. Yet from moving to pay-as-you-drive car insurance, to discounting LEED-certified buildings, we have already seen a number of ways that insurance companies can reward sustainable practices. Given the likelihood of more destructive weather as the climate warms, it is in the industry's best interests to tackle this problem now. But incentivizing low carbon behavior is just one way that insurers can help.Forum for the Future—the UK-based think tank—has just released a new set of recommendations detailing ways that the insurance industry can respond to the challenge of climate change. Created for Climatewise—an industry body set up to tackle these very issues—the report outlines eight specific strategies that could play a crucial role in shifting our entire economy to a lower carbon trajectory.
Beyond simply offering rewards and incentives for lower carbon behavior, or changing payment models to include externalities (like the pay-as-you-drive insurance, for example), the report also suggests the industry should look at new ways to communicate climate risk—for example rating companies by how they contribute to climate change, or offering directors' liability insurance against the risk of future damages claims against carbon-intensive companies.
Crucially, the report also urges insurers to find better ways to insure those most vulnerable to climate change. We've already seen on TreeHugger, for example, calls to shift aid toward insurance for future climate disasters, as opposed to retroactive disaster relief, but insurers could also find ways to pool risk or offer cover through microinsurance.
Given the amount of money that passes through the industry, rethinking investment strategies is another area where insurers have a huge amount of leverage. And using its expertise in risk assessment and management to speak out about climate change, and help create a truly informed, relevant public debate is also identified as an important area of focus.
Just how and how well these areas will be addressed by the insurance industry remains to be seen, but it is good to see the groundwork being laid.
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