Providing Sustainability Support to the Insurance Sector

As countries, companies, and citizens begin to increasingly take collective action in the effort against climate change, the importance of a holistic approach to supply chain decarbonisation has never been clearer. Joint, collaborative initiatives requiring openness and transparency with different stakeholders are clearly emerging as one of the most effective approaches to tackling such a large global challenge. As consequences become more apparent, particularly on physical risk exposures, such as increasing frequency and severity of natural disasters like floods, droughts or wildfires, not many industries are exposured to these risks in the unique way that insurance companies do.

The expansion of exposure to the industry of these sorts of risks will, according to the European Insurance and Occupational Pensions Authority, “…increase risk-based premium levels over time, potentially impairing the mid- to long-term affordability and availability of insurance products with coverage against climate-related hazards”. This has seen the creation of groups such as the Net-Zero Insurance Alliance and guidance such as the UN’s Principles for Sustainable Insurance. These principles are:

1)     We will embed in our decision-making environmental, social and governance issues relevant to our insurance business

2)     We will work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions

3)     We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues

4)     We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles

Crucially, all four principles require collaboration within the complex insurance value chain. In our work at Oakdene Hollins, we have been engaged by two insurance companies who are striving to be leaders in the industry; Aviva and Allianz. Both recognise early the value of engaging actors in their supply chain.

At Aviva, the commitment is to have a net-zero supply chain, with a cornerstone of this commitment to have their suppliers signed up to the Science-Based Targets Initiative (SBTi) and to introduce a sustainable claims programme, a framework through which the embedded carbon of settling an insurance claim is reduced. Working on both of these ambitions with Aviva Canada’s internal teams, we focused on three critical areas:

1)     Identification of priority areas to reduce environmental impact

2)     Design of a sustainable claims management plan to reduce environmental impacts

3)     Communication and training for contractors and suppliers on opportunities to reduce environmental impact

Following a lengthy twelve-month project this pioneering work is set to position Aviva at the forefront of insurance decarbonisation and sustainable claims. Most encouragingly of all, following the pilot training programme with suppliers and contractors, 70% of participants were able to put in place an initial carbon management programme, when prior to this, only 15% had. While there is still clearly a long way to go, these results show a clear positive trend when companies leverage their supply chain influence for decarbonisation purposes.

Meanwhile, Allianz have taken approach that is laser-focused on improving the methodologies behind the carbon measurements of companies in their supply chain, in particularly the benefits associated with repairing, rather than replacing, damage vehicle body parts. As the authors of the study, which can be accessed here, Oakdene Hollins responsible for the coordination and subsequent interpretation of the results of the LCA work carried out by Turkish company Metsims. The report demonstrated not only the environmental benefit to opting to not take the easy route and replace a damaged part with a new one, but also highlighted the importance of a robust and transparent reporting methodology. Put simply – if companies cannot clearly demonstrate the actual benefits of opting to take what may be, on paper, a more environmentally friendly solution, then chances of it be operationalised on wide scale are drastically reduced.

From supplier engagement to life-cycle assessments, Oakdene Hollins have been working with some of the biggest and most progressive names in insurance. Navigating this space is very difficult without many clear examples of best practice and the urgency for action is far outstripping the rate at which companies are taking it. If you would like to learn more about out Insurance sustainability services, get in touch.