At its heart, insurance is about sustainability: ensuring individuals, businesses, and communities can recover, rebuild, and continue forward after a loss.
This is an aspect of social sustainability, the 'S' within ESG, and it is the basic reason the industry exists. Insurance provides a layer of financial support to families, businesses and communities when cancer strikes, a life is lost, a fire damages property, an injury happens at work, or any variety of losses. Insurance creates a level of continuity and resilience in the face of tragedy or loss, helping people get back on their feet and move forward.
The industry often faces scrutiny, critics argue that insurers fail to use products and investment portfolios to lead society toward a low-carbon future, or subsidize historically or economically marginalized groups. These critiques can miss the point of insurance. The best way an insurer can support a sustainable agenda is to deliver on why the industry exists in the first place. In other words, the industry has a key sustainability role already.
There are two main levers that an insurance company can do to drive that social sustainability agenda:
- Maximize claim payouts vs. operational costs (reduce overhead, increase share of premiums available to cover losses).
- Expand access to fairly priced coverage (right product and correct price for each risk).
Yes, both improve the sustainability impact, but they are also practices that essentially every insurance company applies every day.
Insurers' operational improvements enhance both sustainability and competitiveness, which is a win-win for all parties. Here are three examples of making it a reality.
The customer journey
Existing IT and operational ecosystems have been a major source of cost and sales friction to the industry for decades. The outcome is high expense ratios and poor ability to offer the right product to the right customer.
The arrival of modern agentic AI in recent years has opened the door to real, step-change solutions to this problem. The simplest designs start from concierge-type service, and move up in sophistication, but the benefits are clear:
- Significantly lower operating costs
- Less frustration and disengagement by customers
- Better alignment of insurance solutions to customer needs
These solutions are mutually beneficial for insurers. They can better serve their core sustainability purpose by providing more coverage at a lower average cost, but also meet their business goals by enhancing profitability.
Pricing sophistication
Insurance must be financially viable. That requires price to reflect risk. If price does not reflect risk, then insurance cannot function. The 2024-2025 California homeowner's insurance market has become a perfect example of this dynamic.
Fair, widely available insurance requires accurate pricing, and accurate pricing is built on sophisticated segmentation models. The opportunities for insurers to be 'better' are simple:
- Add new data sources – drones, AI analysis of unstructured data, etc.
- Taking advantage of modern, agile data and software platforms, such as Earnix, that allow for the creation of more accurate models and movement to production in days or weeks, versus months or years.
Again, investments in these areas are advantageous for insurance companies, driving sustainability outcomes and business performance.
Fraud countermeasures
In effect, fraud raises the cost of insurance for everyone, without adding any societal value. Reducing fraud in any sector of insurance – from Medicaid to multinational commercial lines, and everything in between – increases the availability and efficiency of insurance for everyone.
The technology changes in this space are a combination of analytics, data, and AI-driven risk models that create significant leaps in fraud detection and mitigation.
So how can an industry that is created for social sustainability become even more sustainable?
Insurers can drive sustainability benefits simply by being better at core processes of selling, pricing, servicing, and handling claims.
The difference now is that insurers have new technology solutions available to improve core processes. As an industry, we can be much better than we are now – and we have the tools to do it.
Let's not forget that insurance has been about sustainability and to be more sustainable, we just need to focus on improving the core of what we already do.
