Could extending insurance policies help carriers be more sustainable?

Could extending insurance policies help carriers be more sustainable? | Insurance Business Canada

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Could extending insurance policies help carriers be more sustainable?

Claims specialist points to “systemic”” challenges to sustainability

Insurance News

By
Gia Snape

The push toward sustainability has gained momentum in Canada as insurers face increasing pressure to address climate risks, reduce their environmental footprints, and offer clients solutions that are aligned with these values.

While many insurance companies have been transparent about their journey to integrate more sustainable practices in their operations, at least one expert believes the industry has a long way to go.

“Sustainability, from an insurer’s perspective, is still being formulated. It’s still fairly high-level,” said Robert Paxton (pictured), managing director of Charles Taylor’s Canadian operations. Paxton started the role this month.

“On the ground, the approach varies depending on the insurer—some are more advanced, while for others, it’s still more aspirational,” Paxton observed. “The first step is always to look at our own operations: minimizing our carbon footprint, working with sustainable suppliers, and ensuring that we, as part of the insurer’s ecosystem, operate in a sustainable way.”

“Systemic” challenges to insurance sustainability

Paxton noted that while some insurers have made tangible progress, others are still grappling with how to implement sustainable practices at ground level.

A practical example of this is how insurers approach rebuilding after a loss. The concept of building back more sustainably, by using materials or methods that reduce future risk, has split the market.

“Some insurers are very supportive of that, and some are not,” Paxton admitted, attributing this hesitation to the higher costs and longer timelines often associated with sustainable rebuilding methods.

“This isn’t about betterment in terms of adding value beyond what was there but building back in a way that mitigates future risks,” Paxton said. “Sustainable materials and methods tend to be more expensive and take longer, often requiring expert consultants.

“What we can do is offer clients sustainable remediation options and let them decide which route to take. By proactively suggesting sustainable solutions, we open up the conversation, rather than waiting for the client to request it.”

He also pointed out a systemic challenge: most insurance contracts are renewed annually, so insurers are often reluctant to invest in long-term sustainability projects when they might not be writing the risk a year later. Extending the duration of contracts could be one way to address this, he said, allowing insurers to think more long-term.

What’s the key to “building back better”?

As climate-related risks continue to escalate, insurers are finding themselves on the front lines of responding to these challenges. Whether its property damage caused by floods, wildfires, and storms or the longer-term impact of rising sea levels on coastal properties, insurers must factor environmental considerations into their risk models.

This has led to a growing emphasis on building resilience and mitigating future risks, often through more sustainable approaches to claims handling and rebuilding efforts.

However, Paxton was candid about the fact that while there is a lot of talk about sustainability, actual strategies for integrating it into claims management remain in their infancy.

“The only way it can truly be successful is with collaboration,” Paxton said, suggesting that this kind of teamwork is necessary to overcome short-term cost concerns and achieve long-term benefits for everyone.

“The key is open communication between brokers, insurers, insured parties, adjusters, and service providers,” continued Paxton. “It’s challenging, but that’s the only way forward. While there’s always a tension between gaining a competitive edge and doing what’s best for everyone, the insurance industry is inherently collaborative, and it has an important role to play.”

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