Whether an insurance company offers worker’s compensation or property coverage, it’s arguable each insurance entity has a responsibility to combat the climate crisis. On an enterprise and individual level, insurance companies can instigate expectations and standards concerning the reckless treatment of the environment.
Enterprises represented by insurance companies could be participating in actions encouraging the climate crisis to worsen. Do insurance companies benefit from this relationship, and is it their responsibility to others who are insured to have stricter regulations?
Dig deeper → 5 min
How Are Insurance Companies and the Climate Related?
Insured people pay premiums every month — so where does this money go? Insurance companies, like banks, can reinvest that money into initiatives they choose to continue financial flow. To climate activists’ disappointment, it’s often filtered into fossil fuel streams, funding projects intensifying the climate crisis.
If insurance companies redistributed funds to clean energy initiatives, it’s possible climate goals could advance at a faster pace. Reallocating funds like this would severely harm the fossil fuel industry, as risky projects do not obtain investors without insurance. Some companies are even discontinuing servicing coal and oil companies.
However, if insurance begins making greener moves and policy changes, they could lose some of their most significant business. Therefore, switching to more environmentally conscious policymaking could hurt their bottom line.
When everything comes down to profit, it makes the relationship insurers have with the climate crisis ethically complex. Insurance companies struggle to maintain profits as they discover they cover more climate-related incidents.
How Could Regulations Monitor the Issue?
Insurance companies could place more responsibility on those seeking insurance, especially if they participate in environmentally harmful activities. Businesses seeking construction property or casualty insurance may need to abide by more eco-friendly insurance guidelines or face consequences, such as termination of the policy.
Economic experts suggest insurance companies leverage insurance access to these major corporations, negatively affecting the climate. Everyone needs insurance so that companies would have no choice but to abide by greener terms.
Insurance companies are paying more for climate-related claims like wildfires and floods than ever, so how is that impacting the industry? Customers want answers.
Insurance companies can be more transparent with customers about climate-related risks by providing data and evidence. Institutions are advocating for climate risk disclosures, so customers are more aware of how older policies may need to be more considerate toward the changing climate.
These warnings also explain how insurance companies are compensating and changing policies as a proactive approach to the climate crisis.
No change matters if there isn’t accountability. Therefore governments — either on federal or state levels — recommend regular assessments to ensure insurance companies abide by these measures consistently.
The Financial Stability Oversight Council performs this with systemically important financial institutions. However, not all companies that should be monitored have this designation for accountability.
How Are Insured Individuals Affected?
When discussing insurance concerning the climate crisis, the situation becomes layered when assessing individual insurance needs over corporate ones. The climate crisis is increasing the severity of natural disasters and causing unexpected temperature fluctuations that put homes and individuals at risk.
Though many migrate to coastal areas, for example, should companies raise prices because of their voluntary risk and the additional care they must perform to remain safe? Or should they not raise premiums because climate change has made most locations volatile?
Insurance companies are hesitant to distribute policies to individuals putting themselves in harm’s way because that forces their hand when reaching out to reinsurers to seek additional protection.
Adversely, Texans were unprepared for the legendary freeze that plagued countless citizens, and insurance companies were not providing additional protections. Premiums continue to increase for the average customer amid inflation and other economic crises.
These factors leave families struggling to afford coverage that could save them from climate disasters. Could insurance companies be forced to provide affordable options for these factors outside families’ control?
Redirecting Responsibilities to Insurers
Insurance companies have been indisputably influencing the climate crisis for decades as investments funded fossil fuel advancement and projects. Additionally, households struggle to keep up with rising premiums as the climate crisis worsens and stability becomes unpredictable in areas with temperamental weather.
Clearer regulations for corporations must change the insurance landscape to ensure accountability and environmental protection. Otherwise, individual insurers and the planet will be at even higher risk for climate-related disasters.