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Climate change emerged as policyholders’ second-highest concern (73%), behind COVID-19 in our Voice of Customer survey. Climate change has upended traditional coverage dynamics and today’s policyholders seek protection and peace of mind more than ever. More than 80% of individual and commercial clients have taken at least one sustainable action over the last 12 months – including activities as small as walking versus driving and as significant as investing in resilient structural infrastructure.
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As customers grapple with anxiety over potential Nat Cat events, insurers are losing sleep, too. Climate change is a top risk for insurers, like cyber, financial, and tech threats. In our executive survey, 74% said they are particularly worried about insurability issues, 72% cite pressure on profitability, and 54% are concerned about regulatory overheads related to climate change.
“It’s too simple if insurers start to exclude highly exposed risks. The industry needs to engage with clients to understand their pathway to achieve more resilience and how they will manage their transition.”
Zurich’s Global Head of Resilience Solutions
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To understand insurance carriers’ maturity in the journey towards climate resiliency, we interviewed 270 insurance executives worldwide. Our conversations revealed that only 8% were on the fast track. We call these future-focused insurers Resilience Champions. For many other players, the opportunity is to be fast followers and turn their commitments into actions.
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While the industry has taken significant steps in accessing new data sources, the opportunity to secure deeper insights from the data is not fully leveraged. However, Resilience Champions are leading the way here, too, with nearly 53% accessing more than six new data sources, including satellite data, remote sensors, weather stations, geo-data, social media data, ESG models, and water levels.
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Capgemini’s climate resiliency framework requires Chief Underwriter Officers to take bold actions and adopt sustainable best practices at scale. In our executive survey, we noticed more than three-quarters of Resilience Champions had adopted one or more initiatives in this space. 59% of Resilience Champions were restricting coverage of unsustainable companies that adversely impact the environment, whereas the industry average is 27%. However, we believe insurers will win by taking a more active role and moving beyond exclusions and towards engagement with clients, governments, and communities.
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Insurers seeking to boost policyholder resilience need a customer journey featuring best-in-class engagement and optimal outcomes. Firms that successfully carry out this complex transformation will strengthen their relevance and profitability and authentically contribute to one of the most significant modern-day challenges. Below mentioned are the key steps to drive climate resiliency.
Climate change is the defining challenge of our times, and customers and insurers are well aware of the risks posed. As a result, some are incrementally taking action.
However, too few insurers are making headway. The whole industry must hit the climate-resilience accelerator and get moving. Start by focusing on critical success levers. Prioritize strategic initiatives aimed at loss prevention. Invest in advanced technologies to assess risks accurately. And establish a diverse and innovative resilence ecosystem.
Deliberation time has expired. Act now to profitably make a difference!