Climate Change and the Insurance Industry

Since Superstorm Sandy, insurance leaders are becoming increasingly aware of the benefits of sustainable building.

By Arthur Murray

The insurance industry conjures up images of old guys wearing suits and fighting anything that threatens the status quo. But perception isn’t reality when it comes to the insurance industry and climate change.

Since at least the late 1980s, insurance providers have expressed public interest in discovering whether there’s a link between global warming and increases in catastrophic storms, according to a study conducted on behalf of the Insurance Information Institute (III). Why? Because providers fuel their business by accurately predicting risk. And many don’t like what they hear.

For example, Karen Clark & Co., a Boston-based risk-assessment consultant, predicts that top hurricane wind speeds could increase up to 5 percent because of climate change. Such an increase could result in up to 40 percent in additional property insurance losses.

In 2007, a group of leading insurers from North America, Europe and southern Africa formed ClimateWise, which tries to raise awareness about the economic risks associated with climate change. Its principles include influencing public policy, incorporating climate change into members’ investment strategies and reducing the environmental impact of the industry.

U.S. insurance companies and global warming

One of the most outspoken U.S. carriers on climate change is one of the oldest. The Hartford, although it’s not a ClimateWise member, has gone on record with its concerns about the issue.  The insurer regularly trumpets environmental causes and calls for stricter coastal development standards and forest-management policies, among other measures designed to combat greenhouse gases.

The company doesn’t just talk, however; it also institutes environmentally friendly practices on a corporate level. What kind of practices? About 4,000 employees work remotely, reducing how much they drive annually. It also has installed electric vehicle charging stations at all its locations in its home state of Connecticut. For customers, The Hartford offers discounts to policyholders who have hybrid or electric cars.

For those and other efforts, the company has been recognized for five years by the Carbon Disclosure Project. Newsweek last year proclaimed it the 14th greenest U.S. company.

The Hartford is far from alone. The Reinsurance Association of America – reinsurance is commonly defined as insurance for insurance companies – is a Washington, D.C.-based trade association for property and casualty reinsurers that operate in the U.S. It has consistently warned about the potential effects of climate change, and President Frank Nutter recently made a public service announcement for the Environmental Defense Fund.

Promoting sustainability

Home insurers also increasingly are adopting practices that reward policyholders for working toward sustainability.

For example, one of the major tenets of Leadership in Energy & Environmental Design (LEED) certification is having 75 percent of a building’s roof covered with recycled materials such as aluminum or steel. These metals are reflective, which helps with energy efficiency; they also are some of the most durable materials used in roofing, especially when it comes to wind and hail damage. In addition, both metals are fire-resistant. Those factors make sustainable roofs a good deal for insurance providers, which means homeowners could qualify for preferred (and lower cost) home insurance policies.

In some states, particularly those at risk for wind damage, providers offer discounts to policyholders who upgrade their roofs with sustainable coverings.

Another way insurers are reaching out environmentally is by offering coverage that, in the event of a covered loss, will pay for repairing or rebuilding a home with green materials and practices.

Car insurance and green practices

Auto insurance providers also reward green activity – sometimes in ways that aren’t so obvious. Many providers in addition to The Hartford offer green discounts of up to 10 percent for electric or hybrid cars. In addition to environmental concerns, there are sound business reasons for this price break. The cars are heavier than traditional vehicles, which makes them safer. Green cars also, for now, are less attractive to thieves, which makes them a better risk for insurance providers.

In addition to price breaks on premiums for electric and hybrid cars, some providers give discounts for vehicles using other gasoline alternatives.

Another emerging trend is the pay-as-you-drive policy. The number of miles you drive – based in part on your daily commute – always has been part of the algorithm for setting car insurance premiums. But new technology is taking the calculation a step further.

Some insurers now offer telematics devices that report on the vehicle’s mileage and hours of operation, as well as such information as your speed and braking patterns. Other insurers rely on devices that report mileage only. In either case, premiums can be adjusted if you cut down on your mileage – a goal that’s shared by conservation proponents.

Here’s why it could matter: The National Association of Insurance Commissioners predicts that in five years, about 20 percent of insurance policies will be pay-as-you-drive – up from about 1 percent today.

So think again about your image of the insurance industry. Few sectors have embraced sustainability the way it has. The fact that sound business reasons guide its efforts should be a selling point as other industries consider the impact of climate change.

This article was written by Arthur Murray, a contributor to the blog. is a resource center for insurance consumers and homebuyers across the country.

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15 responses

  1. “So think again about your image of the insurance industry. Few sectors
    have embraced sustainability the way it has. The fact that sound
    business reasons guide its efforts should be a selling point as other
    industries consider the impact of climate change.”

    Better late than never, I suppose. The “real” sustainability handwriting has been on the wall for years for all to see.

    Sustainable Land Development Initiative
    Designing a ‘Big Wheel’ for Civilization –
    Is Green Investment Finally on the Brink of Breaking Out? –

      1. Are you drunk? If you don’t believe in global warming, then how about I send you a few thousand Bangladeshi refugees to live in your backyard? I don’t have room for them at my place, and at least I’m trying to make a difference!

        1. My experience is that only those in the wrong stoop to Insulting questions. As far as my position on global warming is concerned, see my response above to RicciUW. You guys share a tendency toward premature conclusions and a tendency to use of the same words for the same ideas.

          I’m sorry, but your references to Bangladeshi refugee strike me as the most air-headed red herring I’ve encountered in a long time. Perhaps I just don’t understand your goal. Can you be more explicit about this ‘difference’ you say you are trying to make?

      2. If you’re stupid enough to think global warming isn’t real, why are you on this site in the first place?

        1. I’m not sure how your mind came to the very erroneous conclusion that I don’t think global warming is real. All skeptics I know will tell you the globe has been in a general warming period since about 1850, the end of the “Little Ice Age”.

          They will also tell you that there is no question that the current global warming trend entered a “pause” period about 17 years ago. Leading scientists on both sides agree with this.

          Solar scientists say this pause and its correlation with Sun activity suggests that we may now be in a cooling period that could last for several decades or even centuries. It has similar characteristics to the last such period, the Little Ice Age, which lasted from 1350 to 1850. Nobody knows for sure. All we know is something quite different than we expected is happening to Earth’s climate.

          For one thing, we now have hard direct evidence from highly credible sources of CO2 and temperature data that does not support the CO2-driven version of the AGW hypothesis. The cAGW hypothesis (the catastrophist version) is generally considered to be falsified.

          The validity of the simpler AGW hypothesis is being seriously
          challenged. Some respected scientists say it has already been falsified.

          On another matter of website policy, I’m a bit puzzled Where did you get the idea that this website doesn’t welcome someone whose perspectives on global warming do not agree with yours? You speak as if make those decisions for this website. Do you?

          Finally, I seriously doubt that a caustic ad hominem attack like you made against me is acceptable on this website. Therefore I’m reporting your comment to Editor-in-Chief Jen
          Boynton at

          Others with an opinion either way are also urged to send her an email on the matter.

        2. Using the phrase “alarmist global warming scare” and talking about UN control (of anything) automatically puts you into the wacko camp.

          There is no serious scientist in the world (and never has been) who doubted that we’re causing global warming – there *never* has been debate on this topic among scientists – only in the babbling media. What you are welcome to debate is exactly how severe the issue is and whether we can (or should) do anything about it.

          And back to the subject at hand, it seems perfectly reasonable to me that insurance companies are concerned.

        3. Tell me, Reynaldo, exactly whose ‘wacko camp’ are we talking about here? Yours or triplepundit’s.

          Regarding the UN: I believe most people like the idea of elected representative democracy and ‘one-person, one-vote’. Most realize we have a growing need for an effective world governing body that will respect individual rights as well as community rights. I say that most people realize the UN is not capable of providing these things. What do you say?

          Regarding alarmist AGW: Beginning in the 1970s Dr. James Lovelock, a scientist many count as one of England’s national treasures, was an extreme AGW alarmist. In the Spring of 2012, Dr. Lovelock publicly renounced his catastrophic AGW alarmism, telling the world that he had been wrong, and that what we thought we knew about climate science twenty years ago was wrong. He said we have time to address the problem of greenhouse gases, and he said that the IPCC is an appointed political body that has made a big mess of things. I stand with Dr. Lovelock. Where do you stand?

          Regarding insurance and re-insurance companies, I agree that their concerns are perfectly reasonable. The problem is that are no controls or transparency in the international insurance re-insurance market. There are national controls but no international controls. I support free market capitalism, including national governmental controls to protect public and private interest as defined by each sovereign nation. Do you?

          Regarding what I am welcome to debate: As I read it you are saying it is off limits to discuss new findings in the science or debate the implications. I disagree.

          Is this Reynaldo Perez’s rule? Or is it triplepundit’s rule? If it is the latter I will leave. If it is the former, you are completely out of order. Don’t you agree?


        4. @GeraldWilhite Just wondering where your info about Dr Lovelock comes from? As far as I can find, Dr Lovelock very much believes in global warming and the fact that humans have had a massive influence on the environment. He actually believes global warming has become so catastrophic that we must begin to retreat from certain habitats and completely adjust our way of life. This information came from his website. Please provide your source. Thank you.

      3. The scientific consensus that exists on this subject does not rely on the IPCC. The IPCC reflects the existence of an near unanimous scientific consensus on the subject. Though there is disagreement on how fast and how serious the problem is, there is little disagreement on the basic premise. You’re essentially arguing that the scientific consensus of tens of thousands of scientists from diverse countries, cultures and backgrounds can be ignored because you feel 1 organization is too politicized. The kind of “alarmist” conspiracy that climate deniers assert is happening is on a scale impossible to sustain. You accuse several posters of ad hominem attacks, and yet your main criticism here is not on the science, but on the funders of 1 organization. Your critique is nothing more than an intellectually dishonest ad hominem attack. Your source of information is exclusively those of skeptics, and you make no effort to resolve the apparent contradiction between the more than 95% of Climate scientists saying one thing, while citing only the evidence of the less than 5% of skeptics saying another.

  2. Insurance sells protection against fear. If the insurance company knows the fear is not real but the buyer doesn’t, the insurance company can make out like a bandit. A handful of super-rich, super-rich people know how to make a lot of money in what is called the re-insurance industry.

    To most of us an insurance policy is protection against your fear of what might happen, and is typically well regulated by national government to minimize scams. The re-insurance industry, on the other hand, is a ‘wild west’ unregulated international business that typically buys bundles of 10,000 or insurance policies, then re-markets the risks to equally unregulated international re-insurance speculators who bet that the risks associated with bundled policies will go up or down. Other re-insurance speculators may then make bets against those bets, and the daily chain can go on and on until a single $1 of real insurance may have a $100 or a $1,000 or even $10,000 dollars riding on it.

    Sound like the housing bubble of 2007? It is, except the consequences of collapse will be much worse on ordinary people who will be told the same old story: Obviously, big insurance companies are simply “too big to fail”. We will be made to believe that we have to bail them out.

    The name of the game is wealth transfer from the middle and upper-middle income to the super-rich.

  3. While it’s very good to know those who manage risk – the core of their industry – incorporates scientific facts related to climate disruptions due to global warming, it would be amazing for this industry to do more. How much more? More than simply offering discounts to consumers who drive electric hybrids or replacing damaged homes with green replacement. To take their management of insurance risks a level upward, it would behoove the industry, or its PR front, to join with environmentalists who work diligently to stop oil and gas fracking (USGS confirmed high risks of earthquakes), mountaintop coal removal (water contamination for residential and agricultural use), and of course, the big environmental monster of all, tar sands oil extraction and distribution. Oil and gas pipelines seem to be splitting and spilling all over the country and trains carrying toxic oil derail on a steady basis.

    Does TriplePundit know of any insurance industry generated reports/studies discussing the relentless drive to the bottom to dig out the last of the remaining fossil fuels relative to increased insurance risks?

  4. An equation, using only one external forcing, that results in 95%
    correlation with average global temperatures since before 1900 is at .
    The equation calculates reasonable average global temperature trends since 1610
    including the recovery from the LIA. Change to the level of atmospheric carbon
    dioxide had no significant influence.

  5. Good conversation guys, remember to keep it civil. I’m not going to get into the “alarmist” debate as I think we call agree that, even if it’s not armageddon, climate change is an issue we’re going to have to deal with.

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