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A Simple Ask to Insurers Underwriting the Fossil Fuels Sector

By Team Lemonade
Fossil Fuels

You don’t hear climate activists talk much about the insurance industry, but increasingly, they are. And now businesses — insurance customers — are joining the conversation. That’s why Lemonade is asking our fellow insurers to stop both underwriting and investing in fossil fuels.

As the ultimate manager of risk, the insurance industry quietly shapes modern society, deciding what type of projects can be built and operated. And, at its core, insurance is intended to help people in their most desperate time of need.

That’s why we were shocked when we realized the connection between our industry and the climate crisis. Just like how you can't really drive without insurance, coal plants can't operate without insurance. The Trans Mountain Pipeline can't be built without insurance, and offshore oil rigs can't drill without insurance. In addition, insurance companies invest their customers’ premiums into coal and other seriously polluting industries — and the scale for this is massive. In fact, the 40 largest U.S. insurers hold over $450 billion in coal, oil, gas, and electric utility stocks and bonds. They hold a bigger proportion of their investments in fossil fuels than average index funds. 

When we insure oil, coal, and gas, we  are also driving the current global warming crisis. That warming powers wildfires, hurricanes, and other climate-related catastrophes — the very things insurers (like Lemonade) insure against. 

Our homeowners have a unique stake in the issue, with weather patterns caused by climate change estimated to put $405 billion worth of housing stock at risk. According to a recent survey, 47 percent of homeowners are worried about having enough insurance to protect their homes from a climate change-induced natural disaster.

And it’s not just property that’s being destroyed. Those greenhouse gasses poison our air too, bringing premature death to millions, and visiting pain and suffering on millions more. In as much as such tragedies can be paid for with money, it is often health and life insurance companies that do the paying.

You’d have thought that self interest, if not the greater good, would dissuade insurers from backing the worst offenders. As Bill McKibben, founder of 350.org and Lemonade Giveback partner said, “It is a perverse loop that allows insurers to facilitate polluting projects that cause global warming while at the same time providing insurance against the climate impacts of these same projects”.

So, in 2018, Lemonade became the first U.S. insurer to commit to not investing in, or underwriting, all fossil fuels. To be paying for the damages of wildfires, hurricanes, floods, while simultaneously funding the very industries that are responsible for some of the worst of those damages, just doesn’t make sense to us.

But we’re a young company, and our actions will have the most impact if we’re joined by other, like-minded companies. Which is why we’re calling on other businesses, from all sectors, to raise a collective voice to encourage the insurance industry to move away from fossil fuels by signing onto this joint business statement. Many of you supported the global climate strikes - here’s your next opportunity for meaningful action. 

And for those in our industry who underwrite polluting projects (like coal power plants or tar sands mining) we have a simple ask: please don’t.

Lemonade is a Public Benefit Corporation, meaning we legally may (indeed must) consider the greater good of our decisions, even at the expense of near-term profits. We recognize other insurance companies operate in a more traditional legal framework, with a narrow mandate to maximize profits. But here’s the thing: the interests of our investors and our environment are not at loggerheads. It’s a false dichotomy. Doing the right thing benefits our customers and our shareholders and our future.

How often can you say that?

Image credit: Patrick Hendry/Unsplash

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Lemonade is a licensed insurance carrier offering homeowners and renters insurance powered by AI, behavioral economics and social good.

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