|‘Implementing environmentally sustainable claims servicing – by encouraging repair over replacement, reducing waste or improving waste management, or by providing or requiring the use of recycled parts – can contribute towards decarbonising the claims process at either no or low cost’|
Today the University of Cambridge Institute for Sustainability Leadership’s (CISL) ClimateWise initiative has published a new white paper on climate product innovation which includes a section on encouraging repair over replacement of vehicle parts to reduce waste.
This paper explores the critical role of the insurance underwriting in enabling the transition of the wider economy towards decarbonisation. Opportunities to incentivise climate mitigation and support the growth of low carbon solutions exist in the design and pricing of policies, claims and the provision of risk advisory services.
The industry needs to rapidly lean in to meet the existing risk transfer and advisory needs of clients’ decarbonisation pathways, to anticipate their evolving demands and needs and incentivise their transition.
To accelerate the industry’s response, this white paper represents an initial contribution from ClimateWise. The paper highlights the current market state and further aspects for development across nine key opportunity areas for insurance product innovation to support climate mitigation, with a focus on commercial lines that will drive the transition:
- Enabling and incentivising low carbon choices
- Mainstreaming the encouragement of climate mitigation through efficient and resilient reinstatement
- Implementing environmentally sustainable claims servicing
- Enabling capital flows towards green solutions through risk transfer solutions
- Creating removal-based carbon offsets through natural capital protection
- Scaling emerging and existing low carbon and net-negative technologies and start-ups
- Supporting the sustainable decommissioning of carbon-intensive assets
- Developing risk advisory services to support clients’ climate mitigation understanding and approach
- Developing solutions for increasing climate legal liability and environmental litigation
In the ‘Insurance product innovation opportunities for net-zero’ section, point 3. Implementing environmentally sustainable claims servicing, it states:
“Claims servicing can represent a substantial source of emissions within insurer’s own supply chains, and servicing of claims can lead to waste and ongoing emissions. Implementing environmentally sustainable claims servicing – by encouraging repair over replacement, reducing waste or improving waste management, or by providing or requiring the use of recycled parts – can contribute towards decarbonising the claims process at either no or low cost26. Innovative responses to this challenge are widely seen in personal motor and property insurance, these are, however, yet to be adopted at similar scale across wider business lines:
- Encouraging ‘repair over replace’: RSA is working with suppliers to encourage a ‘repair over replace’ philosophy by recommending sustainable claims solutions for customers to consider.27 In 2019, through this repair over replace approach to claims servicing for motor insurance, RSA repaired 40,000 windscreens, saving 1,500 tonnes of carbon emissions and 540 tonnes of glass waste going to landfill. During this repair process, customers are also incentivised to use electric vehicles.
- Giving policyholders recycled options: Tokio Marine & Nichido also promotes repair over replacement, and promotes the use of recycled automobile parts for personal motor insurance customers for any repairs and replacements. 28”
The report was written in collaboration with Deloitte and Icebreaker One, and builds on previous research by ClimateWise examining policy opportunities to support net zero underwriting.
Commenting on the release of the new paper, Dominic Christian, ClimateWise Chair, Global Chairman Reinsurance Solutions, Aon, said:
“ClimateWise members seek to be at the forefront of product innovation that drives and enables the transition to net-zero and we hope this new white paper will lead the way for greater collaboration within our industry and with external decision-makers to support the urgent need to tackle climate change.”
26 CISL. (2010, November). Sustainable Claims Management. Retrieved from: www.cisl.cam.ac.uk/businessaction/sustainable-finance
27 RSA. (2021, April). A Confident Future: Building resilience through responsible business. Retrieved from: www.rsagroup.com/the-thread
28 Tokio Marine Holdings. (2020). Sustainability Report 2020. Retrieved from: www.tokiomarinehd.com/en/sustainability
To download the paper, click here