Embedded Insurance #7 | Sustainability and the Future of Insurance

Sibylle Fischer
August 13, 2020
Innovation, Startups, Products, Sustainability
For the insurance industry, sustainable business strategy means combining good corporate citizenship with a willingness to evolve.

From managing the needs of customers faced with a changing climate, to addressing gaps caused by shifting global consumption patterns, sustainability in the insurance industry means more than implementing green business practices – it has also become an important signal for predicting a company’s ability to successfully adapt to an uncertain future.

The variables that matter most: ESG

a tiny plant growing out of a glass filled with coins

In many ways, the insurance industry is uniquely poised to lead on matters of sustainable development, as it represents an intersection of different interests: financial services, risk management and information technology. Implementing sustainable business practices, supporting innovation, and operating within a strong regulatory framework all play an essential role in the industry’s ability to effectively manage risk and ensure stable growth over the long term. Generally, these environmental, social, governance variables (also known as ESG) that form the basis of sustainable business practices, help to reduce risk, boost returns, and ensure that investments are aligned with the collective interest of society -- reducing negative environmental costs, preventing and protecting against losses, and distributing insurance to the economically vulnerable.

Pivoting for climate change

With sea levels and temperatures on the perpetual rise, the wide-ranging implications of a changing climate are already upon us. And today there is no disputing that making clean, efficient energy a priority is non-negotiable when it comes to mitigation practices. So for insurers, sustainable business strategy has meant not only investing in those products, projects and processes that reduce dependence on carbon and other greenhouse gas producers, but also a willingness to explore emerging opportunities for insurance outside of traditional or established markets.

Start up risk advisors like The Demex Group are looking at just this kind of climate-driven financial volatility and working to create customized products and solutions to address the gaps. For example, what products can we offer a ski resort that now gets either too much or too little snow in a given season? As weather events (both extreme and mundane) increase in the data sets, new opportunities to evaluate localized risks and sell related products that protect a company’s balance sheet will emerge.

Managing risk in volatile markets

Erdkugel aufblasbar auf einer Wiese

Climate change and other global catastrophes (like Covid-19) have introduced enormous volatility into the supply chain and many different commodity markets, from fruit to fish to soy to wheat. When consumption patterns are in a period of radical change or volatility, whole markets can crater, driving businesses and farmers into financial ruin.

New insurance products are helping manage some of the risk inherent to the commodities market. One of those is Stable, a product that helps insulate its clients in local, niche and untraded markets against rapidly changing commodity prices through customized contracts that stabilize losses through price protection.

A shifting insurance landscape requires creative thinking


Over the last decade, sustainable business practices have become essential to measuring the health and predicting the growth of any organization. Staying relevant and creating added value as an insurer (not to mention surviving industry disruption) depends on the ability to adapt in the face of change. It’s this kind of flexibility that forms the heart of a sustainable business strategy. In order to create value for themselves and their stakeholders, insurers need to be looking at everything they do through the lens of sustainability: emerging market opportunities, investments in innovation and infrastructure, managing changing customer demand, and even streamlining internal protocols. Doing so helps guarantee growth and build readiness for our uncertain, but certainly changing, collective future.