Drivers Want Green Insurers, but Insurers Struggle

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by KnowESG
KnowESG_Drivers Want Green Insurers, but Insurers Struggle
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Solera, the global leader in managing vehicle lifecycles and insurance claims, has unveiled the results of extensive research involving 10,000 drivers across the UK, France, Australia, Germany, and Spain.

The findings reveal that a remarkable 75% of respondents expressed a willingness to switch to insurance providers offering more environmentally friendly policies.

However, a separate global survey of decision-makers within the auto insurance industry sheds light on a storm of challenges facing providers. These challenges extend beyond meeting the rising demand for sustainability and include navigating the complexities of new ESG (Environmental, Social, and Governance) regulations.

In response to these challenges, Solera is introducing "Sustainable Estimatics," a groundbreaking carbon tracking tool designed to empower insurers to monitor and offset the carbon emissions associated with the entire customer claims process.

Storm of Issues

Research indicates that a resounding 99% of insurers recognise the importance of prioritising sustainability metrics. Yet, they encounter numerous obstacles in translating this recognition into action. Specifically, 47% of insurers express the need for improved tracking and management of emissions data, while 29% are concerned that their efforts may be perceived as mere "greenwashing." Additionally, 46% require increased budgets to invest in more sustainable solutions.

Data plays a pivotal role in the sustainability challenges faced by insurers, both in terms of accessibility and the necessary skills to utilise it effectively. Approximately 22% of insurers struggle with limited access to data related to vehicle claims emissions, while 27% grapple with data silos. Similarly, 23% lack the essential analytics skills required to make informed decisions concerning their claims data and sustainability efforts.

Jing Liao, Chief Administrative Officer and Executive Chairwoman of Solera's ESG Committee emphasises that the insurance and automotive sectors are witnessing a growing demand for eco-friendly practices. However, intentions alone are insufficient, and there is still a significant number of companies perceiving sustainability as a mere checkbox requirement rather than an integral element of sound business management.

She highlights that research shows data is a major obstacle to advancing sustainability efforts, emphasising that reducing carbon emissions is impossible without a thorough understanding of them. Effective solutions are needed to enhance claims data management and reduce emissions for insurance providers worldwide.

Insurers Overlooking Scope 3

One of the most challenging aspects of sustainability metrics is the measurement of Scope 3 emissions, which encompass indirect emissions within an organisation's value chain. This includes emissions resulting from policyholders' vehicle repairs. Research reveals that just over half (53%) of global auto insurers currently measure Scope 3 emissions, with lower figures in individual countries.

Insurers Insufficiently Prepared for New Sustainability Regulations

Sustainability is now a mandatory regulatory requirement, exemplified by the EU Corporate Sustainability Reporting Directive (CSRD), set to take effect in the 2024 financial year. CSRD applies to large companies in Europe or listed on EU-regulated markets, necessitating the reporting of the environmental and social impact of corporate activities, including audit obligations.

Despite the imminent implementation of CSRD regulations in Europe, the survey results show that six out of ten insurers do not consider themselves "very well prepared" for these regulations, with an even higher proportion in Spain.

ESG regulatory pressures are expanding globally, affecting insurers on an international scale. The United States has witnessed significant changes in the regulatory landscape driven by new ESG initiatives, such as the requirement for insurance companies to adhere to TCFD reporting by November 2022 as part of the NAIC Climate Risk Disclosure Survey.

On the global sustainability reporting front, Asia-Pacific's leading 100 companies are setting the standard, with 89% of them disclosing information, representing a 40% increase compared to a decade ago.

Bill Brower, VP Global Industry Relations at Solera, underscores that insurers must act swiftly to provide greener policies and embrace sustainable practices, as failure to do so could jeopardise customers, competitiveness, and regulatory compliance, leading to substantial fines. For instance, UK firms may face charges of up to £40 per tonne for misreported CO2 emissions under new regulations.

An Innovative Tool to Address Challenges

To address these demands and challenges, Solera is launching an innovative product called "Sustainable Estimatics." This tool empowers insurers to measure and reduce the carbon emissions (CO2e) associated with their complete auto claims process, with a particular focus on the challenging Scope 3 emissions. It features a unique algorithm developed by Solera, standardising the measurement of Scope 1, 2, and 3 CO2e emissions throughout the entire lifecycle of auto claims.

In practice, Sustainable Estimatics assesses CO2 emissions, offering insurers valuable insights for reducing their carbon footprint. For example, it allows insurers to compare the emissions associated with repairing car parts versus replacing them, facilitating informed decision-making. Solera has also obtained ISO 14064 certification for auto claims, further validating their methodology and technology for collecting verified carbon emissions data and supporting efforts to mitigate or offset emissions.

Brower explains that Sustainable Estimatics is designed to meet the urgent sustainability demands facing insurers, not as a mere compliance checkbox but as a means to provide customers with more competitive and environmentally friendly insurance premiums.

The tool's standout feature is its ability to effectively address Scope 3 emissions, which are notoriously challenging to measure. By assisting insurers in measuring and mitigating these emissions, Sustainable Estimatics is helping pave the way for a greener future.

Jan R Carendi, PhD h.c., Solera Senior Advisor and Independent Director, emphasises the importance of focusing on sustainable offers as both a conscious consumer and provider of auto insurance services. He highlights the crucial role of data and Solera's data solutions in supporting sustainability programmes, ultimately leading to products and services that provide higher customer lifetime value while positively impacting the environment.

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Source: Solera

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