Insurers examine cutting premiums for greener motoring customers
Insurers are examining ways to encourage customers to reduce their carbon footprint, including offering lower premiums, as the industry faces growing pressure to use its underwriting policies to tackle global warming.
Policies such as pay-as-you-drive already provide a nudge to motorists to cut their mileage, but some of the world’s largest insurers are now looking more broadly at how to reward greener customers.
Italy’s Generali has for a decade offered pay-as-you-drive and pay-how-you-drive insurance. However, it is now exploring whether to offer a policy discount for drivers of electric vehicles.
Chief financial officer Cristiano Borean told the Financial Times that it was “collecting the information to get [to] a discount [on electric vehicles]”, such as claims frequency and the cost of repairs. The plans are at a very early stage and any discount will depend on the data gathered, the company said.
Axa chief executive Thomas Buberl told the Financial Times Global Boardroom summit earlier this month that individual behaviour needs to be the next focus of the climate debate.
“We haven’t yet reached the place where we also talk about how each individual needs to change in order to make his or her own carbon footprint more optimal,” he said. That could include not travelling “as far and as frequently as we used to,” he added.
Buberl added that Axa “should have a look” at providing incentives to those who drive less or build with more sustainable material. But better data on measuring an individual’s carbon footprint would have to come first, he said.
Although plenty of insurers have promised to focus their often vast investment portfolios on those companies committed to cutting carbon emissions in line with the Paris climate agreement, they have been slower to use their underwriting policies to help reduce emissions.
The industry bears “a responsibility to develop insurance that is designed for the future and supports society living more sustainably,” Aviva chief executive Amanda Blanc told the FT. She said the company was already taking action by not charging extra on customers’ home insurance for the presence of items such as solar panels and heat pumps.
This area of insurance is likely to “evolve quickly” Blanc added, as electric vehicles become more common and homes become more energy-efficient.
Green discounts could help insurers win customers, said Jim Bichard, leader of the global insurance practice at consultancy PwC. “For a lot of people insurance is still an unwelcome cost, so things that they can do to reduce that cost are always welcome,” he said. Other customers will be attracted to this approach “because it aligns with their values”, he added.
By Miles is a UK insurtech offering pay-per-mile motor cover, charging customers a monthly premium based on their usage. Founder and chief executive James Blackham said the approach encourages people to think twice about using a car for shorter trips, while reducing the likelihood of accidents and claims. “Rewarding positive behaviour change to cut carbon emissions is a must,” he said.
The company is able to “measure exactly how much emissions people are creating, too”, Blackham said. “We’ll be using this information to make it even easier for drivers to make a difference.”