Media Coverage
Climate change presents opportunities for insurers, says ABI
17/09/2007 Joanne Wallen | Complinet
Climate change could present opportunities rather than threats for insurers, the Association of British Insurers said at the launch of its ClimateWise initiative.
Jane Milne, ABI assistant director, property and creditor, told delegates at the association's climate change conference in London that there could be a £450m opportunity in "industrial renewables", rising to £1.3bn by 2020. There could also be a five-to-15 per cent growth in property insurance as consumers become more aware of the potential impact of climate change on their homes and properties.
The opportunities from carbon trading were more difficult to quantify, she said. Under the Kyoto Protocol, firms can invest in carbon offset projects in developing countries. There will therefore be plenty of opportunity to insure the risks associated with these projects, Milne said.
Research suggested that carbon trading would be worth some £33.5bn by 2010 globally. If insurance secured just one per cent of this, the industry would be looking at an additional £325m a year by 2010.
In addition, if there were to be increased uptake of existing products and if the industry could "eradicate underinsurance," there would be even more money in the pot. She said some 90 per cent of small and medium-sized businesses in the UK were believed to be under-insured. The Government did not believe it had a responsibility to bail businesses out. "Its view is that they should be adequately insured," she said.
Change of perspective
Existing products could benefit from changes brought about by climate change, Milne said. For example, insurers were likely to see more claims due to food poisoning as temperatures rise. But there should equally be opportunities to sell new policies or increase premiums to offset these new risks.
Similarly, insurers that managed to provide cover for new technologies to protect homes from flooding, for example, would gain a competitive advantage.
Citing recent research carried out on behalf of the ABI, Milne said customers, both businesses and individuals, were "waking up" to the risks posed by climate change. One of the five main principles of the new ClimateWise initiative, which 37 major insurance companies have so far signed up to (see below for related Complinet article), is to "support climate awareness among insurance industry customers".
A "significant minority of customers" surveyed, nearly 40 per cent of UK homeowners, said they were interested in a climate-proof policy for their home insurance. Milne said, however, that what was needed was to find a way to "tip them into action."
The industry, she said, had a "vested and legitimate interest" in encouraging customers to act. In communicating with customers insurers should "communicate the cost of failing". They should point out how to "avoid the stick" rather than offering the promise of a carrot, she said. Equally, this communication needs to be in language that customers will understand. People's view of risk was "localised", Milne commented. The survey showed that people in the Midlands thought flood was the greatest risk, those in London chose drought while the Scots said storms were the greatest risk. This reflected people's actual experiences.
Wording and personalisation is all important, Milne said. She cited the example of the Holiday Inn hotel group, which encouraged people to reuse their towels by changing the standard wording in their rooms to telling them first of all "75 per cent of people in this hotel do reuse their towels." This, Milne said, increased reuse by ten per cent. They then refined that to telling people, "75 per cent of people who've stayed in this room reused their towels," and that saw a further ten per cent uplift in reuse.
Insurers, she said, had a "vital role" in communicating the risks to customers and in offering solutions. Insurers are after all, risk experts, she said.
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