Insurance Industry Must Bring Climate Issues To The Fore

By admin, February 6, 2013

The insurance industry is footing an ever increasing bill for the devastation being caused to thousands of homes and vehicles across the UK as a result of climate change. The huge rise in payouts over the past decade or so for risks such as floods could render the insurance industry unsustainable if the current trends continue.

The insurance industry is being urged by the Chartered Insurance Institute (CII) to step up their efforts to engage the government and policymakers on the issue and increase awareness of the dangers climate change poses. It is feared that without swift action insurers will be unable to offer cover to residents in high risk areas of the UK as well as oversees.

The CII recently published the third in their series of reports looking closely at the impact climate change is having on the insurance industry. The report put forward three visions of the future, devised by leading climate change and insurance experts, and the risks each posed for insurers and society as a whole.

Best case scenario

This favourable scenario looks at the future in a world that has managed to harness renewable sources of energy effectively and successfully minimise the amount of green house gases produced by the burning of fossil fuels. Governments across the world have been able to develop infrastructure sufficiently to ensure there are early warning systems in place to allow them to counter any climate risks without the destructive consequences such events bring today. In this scenario insurers encourage the development of sustainable practices by incentivising their customers financially.

The middle ground

In much the way the insurance industry is headed at present, this scenario bases its premise on a limited endeavour to introduce sustainable practices and sporadic efforts by governments to increase the use of renewable energy sources. In this scenario the insurance industry would be left with little choice but to withdraw cover from high risk locations prone to extreme weather conditions.

Worst case scenario

In this scenario only very little effort is made to increase the use of renewable energy sources. This would push the climate of the earth beyond the point of redemption, whereby efforts to increase sustainability in the future would be essential, but their implementation would be extremely costly and would only have limited success. The insurance industry would be unable to meet the costs of such an increasingly turbulent natural environment, with freak weather events and localised devastation becoming commonplace.

Although these scenarios are future predictions and far from definitive, they have been created based on detailed analysis of current and historical trends. The consequences of neglecting to act now and allowing our climate to become increasingly tempestuous are clearly severe, and potentially irreversible.

Claire White is an employee of ConstructaQuote, one of the UK’s leading insurance comparison sites, working with some of the UK’s leading insurers to find businesses and private customers alike great prices on a wide range of insurance products .