Who was the first to receive a distress call when a business was flooded or destroyed by a wildfire? Insurance agent or agent. Now, I believe that brokers have an important role to play in building and supporting communities that are struggling with climate change. If brokers can help their clients better manage environmental risks – a key pillar in ESG – they can better fulfill their advisory role.
Just looking at climate change in isolation is difficult because it has a major impact on the S pillar in ESG. In many cases, few communities are vulnerable and lack adequate protection. Climate change and environmental risks affect everyone on the planet – not just people who buy insurance. Brokers need to keep this in mind, and ensure that they contribute to resilience – through insurance and risk reduction – in their communities.
This policy aligns with the broader themes of diversity, equity, and inclusion (DE&I) – arguably the cornerstone of the S pillar, and another critical area for insurance businesses and providers. Pa Insurance Business we talk to insurance leaders every week about the importance of DE&I and the huge benefits it can bring to the business. The result is that insurance businesses and organizations with diverse groups have better results because they are able to attract and retain different customers. It’s nonsense if you ask me.
As for leadership – the G pillar – this is nothing new for those in the insurance industry. Brokers, agents, and insurance carriers have developed strong controls over the years, taking into account changes in regulations and compliance, and using tools such as data and analytics to understand risk factors – including E and S risks – on their websites and business portfolios.
So, that’s how I can summarize ESG’s impact on insurers and insurers – but there are some things to consider.
First, businesses (customers) and their customers are showing concern for ESG-related issues and are taking action within their organizations. The simple equation that exists is: an ESG-aware client does not want to work with an ESG-blind broker. Covering all bases, I think it makes sense for brokers and agents to stay ahead of the pack to be seen as thought leaders and leaders in all things ESG. Only when they meet the expectations of their customers for these reasons.
Another important factor is that many insurers are now integrating ESG into their organizations and business strategies. For example, the competition for zero emissions may not be as visible in the insurance industry, where every company seems to be trying to undercut the competition by announcing short-term plans for change. As clients, carriers on the ESG path may not want to hinder their progress by closely aligning with a business or organization that lags behind on ESG.
Also, insurers are starting to incorporate ESG into their underwriting strategies – in some cases, completely changing their risk appetite. Again, this is important for brokers and agents to consider. For example, insurers may only want to cover companies with certain ESG strategies, and may drop industries that are seen as ‘dirty’ such as oil and gas. Brokers with significant leverage or any ESG risks may need to reassess their market strategies and educate themselves on how to mitigate their exposure. All of this is important for brokers to understand so that they can prepare their clients to go to the market and find the best insurance solutions.
So that’s my two cents on why insurance companies and providers should care about ESG. This is a new concept, and we are all learning about it every day. If you have ideas about why ESG is important for your business or lending, please let us know in the comments section below.