How Life Insurers Can Meet the Needs of the Green Consumer

Jaqui Wassenaar
Tjaart Esterhuyse
Alissa Holz

A girl and an older man plan a tree seedling together

In Brief

Responding to customer demands for action on climate change, insurers are exploring “green insurance” products and approaches that raise awareness around sustainability and directly support green initiatives.

In the wake of the warmest June-July-August period on record, life insurers face a burning question from global consumers: What are you doing about climate change?

Many insurers can demonstrate that their businesses consider ESG (Environmental, Social, and Governance) issues and meet environmental regulatory and reporting requirements. The entire industry is also aware that it will have to contend with the impact of climate change on mortality and morbidity risks, a reality that will eventually affect product pricing.

But perhaps the most immediate effort insurers can make is to explore and adopt “green” products that appeal to the 65% of people globally who say they will buy sustainable products. This article will explore the changing habits of consumers and what really motivates them to purchase green products and services. It will also detail innovative products from around the world that are designed to help consumers reduce their carbon footprint, financially support green initiatives, or assist people directly impacted by climate change.

Making Sustainability Easier for Consumers

Consumers have proven willing to make more sustainable choices. A 2020 study by Deloitte found that 43% of consumers surveyed said they have opted for brands with more sustainable products or services.

When considering strategies to appeal to green consumers, it is important that as an industry we ensure that any products or services are robust, backed up by evidence, and avoid any perception of “greenwashing."

So, what strategies can insurers use to enter the conversation and encourage green behavior among consumers?

Social influence appeals to the human need to fit in and conform to the behavior of those around us. It can take the form of a call to duty, a competitive challenge, or demonstrable evidence of a consumer’s green commitment, like the opportunity to display a badge or pin.
People are creatures of habit. It takes effort to break a bad habit and adopt a good one, but once incorporated into a person’s daily routine, it can have long-term positive effects. Businesses can nudge consumers toward better habits by offering incentives or making the “good” choice the default option.
With the power of the domino effect, an opportunity to take a small action can make a consumer more likely to make larger changes down the road. Companies can consider incremental programs that “step up” more sustainable actions as customers participate.
Communications around green products can appeal to a consumer’s emotional side and their rational side. For the emotional consumer, offer public praise when a consumer opts for a greener choice. For the rational consumer, quantify the cost savings of a greener choice. Whatever the tenor of the communications, remember that people are naturally loss-averse and prefer avoiding losses to achieving equivalent gains.

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Going Green

While there is no set definition of “green insurance,” several life insurers have pioneered products and services to appeal to green-minded consumers or directly cover risks impacted by climate change.

Examples of green products and initiatives offered by life insurers and related companies around the globe include:

Direct coverage of climate change risks. More than 20,000 women laborers in the state of Gujarat, India, had access this summer to Extreme Heat Income Insurance for the first time. Insurtech firm Blue Marble and nonprofit Arsht-Rock offered the coverage as a pilot project; the policyholder was an organization of informal workers called the Self-Employed Women’s Association, or SEWA.

When temperatures exceed a three-day average threshold, the coverage compensates for lost income. The program’s backers are subsidizing premiums for the pilot, but SEWA members, including agricultural and construction workers and women who assemble products in their home, have indicated they are willing to contribute premiums in the future.
Green investment policies linked to taking positive action to combat climate change. In 2021, a major insurer in Singapore launched what it touted as that nation’s first green life insurance product. The single premium endowment plan allows customers to invest from SG$5,000-$100,000 for a death and total permanent disability plan with no medical underwriting required.

The company invests the premiums in a portfolio focused on climate change mitigation and global and local green initiatives, such as renewable energy, green buildings, and the deployment of electric vehicle (EV) charging stations. The insurer supplements the product with a charitable element: For every SG$1 million raised for the tranche, the company donates SG$1,000 to Singapore charity Zero Waste SG, which advocates for environmental priorities like eliminating food and organizational waste, reducing reliance on disposable plastic items, and increasing household recycling efforts.

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Green offsets or benefits. Recognizing the 200 million pages of paper used annually to administer its employee benefit claims, an insurer in Hong Kong introduced a 1% “green premium rebate” for customers who opt out of paper communications and instead use its online app.

Meanwhile, in the U.S., California banking startup Ando extended insurance offers to its customers and pledged to plant 100 trees for every home/renter, pet, auto, or umbrella policy written under the program. “A mature hardwood tree can save 48 pounds of CO2 from entering the atmosphere every year,” the bank said in marketing materials. “Over the lifespan of a tree, that’s a significant reduction.” Ando also stressed that it only partnered with insurers who committed to directing a portion of premiums into socially and environmentally responsible investments.
Green behavior change assistance. Global banking leader Meniga allows its customer app users to track and reduce the carbon footprint of their purchases based on the premise that increasing awareness is the first step to making meaningful behavioral changes. The Meniga Carbon Index reports the carbon intensity value of approximately 80 spending categories. Prompted by digital gamification, users can “compete” with other banking customers to reduce their carbon footprint. The app delivers notifications to educate users on aspects of their spending that are most detrimental to the environment.

Conclusion

As society deals with the widespread effects of a warming planet, consumers will continue to demand more action from companies on climate change. Insurers will need to be ready to address this demand with genuine and well-considered business practices and enticing products that speak to customer needs. Watch this space closely; it will be exciting to see the next generation of green insurance unfold.