Today, June 28, we celebrate Insurance Awareness Day, an opportunity to once again highlight the importance of insurance in our everyday lives: it helps us protect ourselves from any kind of potential risk and ensure financial security and wellbeing in those aspects of our lives that generally make us worry the most.
But what makes insurance important today? What are the new risks that are currently shaping the insurance industry?
Even if insurance dates back to ancient times, it still represents one of the fastest evolving industries in the world – and at the basis of its evolution there are always consumers’ needs and concerns.
When it comes to current events and the issues that are relevant right now – especially considering the summer season that has just started – one of the “new” concerns that people are currently expressing is the so-called “eco-anxiety”. Eco-anxiety can be defined as the fear of environmental cataclysm that comes from observing the impacts of climate change – and it has been proven that it is something that is already impacting the insurance sector, too.
The impact of climate change on both insurers’ and customers’ priorities is indeed the focus of the latest World Property and Casualty Report that was published last month by Capgemini and EFMA, the global non-profit organization which facilitates networking between financial services decision-makers.
The scenario portrayed by the 270 insurance executives and nearly 5000 consumers involved in the study shows that climate change is one of the main concerns for consumers, as well as a high priority for policyholders and insurance industry players alike.
Here are some of the report’s key findings:
• Climate change represents policyholders’ second-highest concern (73%), behind the pandemic (84%). Among consumers’ top concerns in third place is unemployment (64%).
• Climate change is a top risk for insurers, too. According to the report, 74% of insurers said they “are worried about insurability issues”, 72% cite “pressure on profitability”, and 54% are concerned about “regulatory overheads” linked to climate change.
• While most insurers acknowledge the impact of climate change, most of them still have to develop a climate resilience strategy, with only 8% of insurers believing that their firm can be considered a “champion” in terms of sustainability initiatives
Therefore, climate change is a high priority not only for activists, insiders and experts, but also for all market participants as well as consumers.
As climate change has an impact on the quality of life of people all over the world and on life itself, it brings about an increasing need for insurance policies covering healthcare, life risks, accidents and illnesses. The current climate crisis also has a direct impact on the economy of those countries relying mainly on agriculture and livestock production. Additionally, all the ongoing changes affecting the environment have repercussions on entire territories, causing hydrogeological instabilities that put people and their houses in danger.
This means that catastrophe insurance should be regarded as complementary to all the other types of insurance coverages and that, in order to accommodate these needs, the insurance industry needs to focus on systems that offer predictive models, dynamic pricing and big data analysis.
Taking into account climate change and all the related issues when reflecting on what makes insurance relevant today, it is obvious that now more than ever it is important for the insurance industry to be ready to face environmental challenges, or rather, sustainability challenges as a whole and to be resilient in order to continue addressing customers’ concerns and meeting their needs.