The Role of Insurance in Sustaining the Environment

Insurance in Sustaining the Environment

Sometime during the 1990s, the United Nations statutory body United Nations Environment Programme (UNEP) realized the role financial institutions could play in protecting the environment while maintaining a healthy profit for their business. After initial talks with https://homeownersinsurancecover.net/, the UNEP joined hands with leading insurers, reinsurers, and pension funds companies to work towards a common goal of sustainable development.

This collaboration was carried forward by the companies diligently and came to be known as the UNEP Finance Initiatives (UNEP FI). Under the collaboration, companies pledged to work towards achieving a balance between sound business practices and environmentally-conscious decisions for the welfare of people.

Environmental Risk

Any practice that is considered detrimental to the natural environment would be considered as an ‘Environmental Risk’. It is the role of insurance companies of countries under UNEP FI to carefully assess the creditor’s background for its application so as to minimize or eliminate any possible environmental risk it may carry.

For instance, a water treatment plant company may apply for a certain amount of insurance at an insurance firm. It will be the job of the insurance company to take in account the volume and location of the discharges of the plant, location of the industry, types of chemicals, and compounds used in the process to minimize the company’s environmental risk.

Major insurance companies such as Allianz SE, ASN Bank, AON, Barclays Group plc, China Development Bank, Deutsche Bank AG, ING and many more have already pledged their allegiance to the accord.

A Case Study: Singapore 2018

Placing emphasis on the degrading environment in the country, Singapore declared 2018 as the “Year of Climate Action”. Going with the initiative, the insurance sector was asked to actively participate in the country’s effort to work towards a more sustainable environment.

Claudia Salem, CEO of AIG Singapore and a management committee member of Singapore’s General Insurance Association (GIA), talked about how the insurance sector will play its part. Transitioning to a digital documentation policy from a paper-based policy will help in saving an approximate 1500 trees per year – and that is just one of the many steps!

The industry will also take certain measures to improve customer experience by providing direct online purchase of insurances, offering end-to-end policy servicing claims, and providing digital quote engines to reduce the purchase time and improve operational efficiency.

Another area which relies largely on paper works is the repayment of home insurance claims via the use of cheques. To tackle this situation, insurance bodies are introducing instant claim payments linked directly to the creditor’s accounts, eliminating the need for paper cheques.

Other than shifting their workforce to a digital scale, key insurance companies are also actively participating in thought leadership meetings about Environmental Risk as influencers. In addition, the GIA took a step forward by pledging its support to UNEP FI this year.

Conclusion

The entire insurance industry needs to unite together to make a path for a more sustainable and environmentally-conscious way of doing business.

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