The past few years has seen a significant increase in regulatory interest in ESG (Environmental, Social and Governance) as pressure builds on businesses to address growing concerns about their impact on the planet and wider society. The challenge for insurance firms is that pressure is only set to increase, with governments committed to enforcing even more stringent ESG measures in the next two years. To help insurers navigate this ever-evolving space, Ashley Easen – Director of Risk and ESG, shares insights into the steps firms can take to meet regulatory requirements, build customer trust and protect against reputational damage.
Know your ESG requirements
In today’s environment, insurers are increasingly expected to be aware of their ESG obligations. The UK Government has a range of mandatory, voluntary and comply-or-explain regulations, with the latter requiring an organisation to clearly explain why it does not meet requirements and provide an alternate plan to address concerns. Between new regulations and updates to existing legislation, an increasing number of firms are appointing teams or individuals to assume responsibility for staying abreast of changes. Regularly monitoring updates from regulatory bodies will provide insurers with the insights needed to align their practices with evolving standards, to help maintain compliance in the years to come.
Be proactive about policies and strategies
It is no longer enough for insurers to merely be reactive in the ESG space. From underwriting and risk management to investment decisions, integrating ESG policies and strategies into key business areas should be a priority. This extends to weighing up exposure to the impact of climate change and the inevitable legislative and regulatory measures aimed at tackling the global risk. The Task Force on Climate-Related Financial Disclosures (TCFD) has already developed a framework to help companies more effectively disclose climate-related risks and opportunities, while the Prudential Regulation Authority has published expectations for banks and insurers to manage financial concerns due to climate change. Teaming with a strategic claims partner is also a great way for insurers to assess ESG risks and better understand and quantify potential exposures.
Invest in your people
Given the growing importance of ESG, it is no surprise that staff education and training are moving to the top of insurers’ agendas. From Better Insurance Network releasing an e-learning solution to support sustainability upskilling, to Lloyd’s Market Association launching a dedicated ESG Academy, UK insurance firms are increasingly able to invest in training programs that raise staff awareness about ESG issues and their implications. It is one thing to have a great strategy. It is another to have qualified and committed people to put it into practice.
Be committed to transparency
Quality reporting and disclosure lies at the heart of ESG. Establishing strict processes and procedures for keeping stakeholders abreast of results and developments not only enhances transparency but builds trust, fosters a positive reputation and provides peace of mind should the regulatory spotlight fall on a firm.
Utilise data and metrics
Few sectors have been untouched by the rise in data analytics and ESG-conscious insurers are benefiting by adopting technologies that crunch the numbers to assess and manage risks. Selecting the right frameworks is essential for balancing strategic objectives with reporting requirements, while investing in quality tools can capture, aggregate, measure and robustly report against metrics. The demand for data-driven decision-making is only set to rise in 2024.
Embrace collaboration
Given the growing scope of ESG compliance and legal risks when it is done poorly, there is a lot to be said for collaborating with industry experts. Many insurers are seeking advice from or partnering with industry peers and government bodies that are well versed in not only how to meet regulations but stay ahead of the curve. As a strategic claims management provider, Gallagher Bassett has extensive experience in helping clients amplify their individual sustainability initiatives and boost the insurance industry’s collective ESG reputation.
Contact us to learn how Gallagher Bassett can support you.
