As individuals, we have become more aware of how we, as consumers, can change our habits to be more sustainable. As employees, we wanted to explore how we could apply this to Claim Technology, and how we, as a catalyst for change in the insurtech space, could help other companies in the insurance sector to become climate positive too.
What is the difference between carbon neutral and net zero?
Carbon Neutral is where we actively reduce and then offset any remaining emissions with carbon reduction projects whereas Carbon Zero is where we eliminate fossil fuels from our activities. The UK has made a legal commitment to reduce carbon emissions by 78% by 2035 (compared to 1990 levels) and to be net-zero by 2050 to mitigate against the rise in global temperatures. Claim Technology has partnered with Ecologi to become Carbon Negative by making investments to take more carbon out of the atmosphere than we, and our employees, emit.
What can the insurance sector do to make its vital contribution?
Reducing one’s carbon footprint is more intuitive for primary sector (i.e mining) and secondary sector businesses (i.e. manufacturing) but less intuitive for tertiary sector businesses, i.e service-based businesses like insurance who aren’t involved in either the extraction or creation of products. But insurance is about protecting the things that matter to us and claims are managed by the people that work for us, so a good starting point would be for insurers to take on the commitment to offset the carbon emissions for the things they insure (e.g. cars, homes, ships etc) and the emissions by the staff that deliver that service.
Can you give us an example of how this might work?
Let’s take motor insurance. The lifetime emissions for a medium-sized petrol car are estimated to be 24 tonnes or 18 tonnes for an equivalent electric car. Interestingly, electric cars emit only 25% less carbon because of the intense amount of carbon used in their manufacture. Assuming an average life of 12 years, a petrol vehicle is therefore responsible for 2 tonnes of carbon per year (or 1.5 for an electric car). These emissions can be offset today by buying carbon credits (at £3.70 per tonne). At a total cost of £7.40 for a petrol car and £5.55 for an electric car, this represents just 1.7% of the average cost of a comprehensive motor policy.
I like a ‘miles-based’ model, i.e calculating a vehicle-specific carbon offset price based on a combination of expected mileage lifecycle (e.g 300,000 miles for a new Tesla) and the number of miles actually driven. This has the advantage of creating economic incentives for insurers to actively work with policyholders to buy vehicles with a higher lifecycle expectancy or reduce actual mileage, which in turn reduces risk, which feeds into lower premiums. This creates a virtuous cycle that is a win-win-win; for insurers, policyholders and the environment. Can you see how doing business ethically is good for businesses too?
How could we extend this into the insurer’s supply chains?
Let’s continue with the motor example. Insurers or their supply chain could
- offset the cost of repairs or value of total losses – a good rule of thumb would be 720kg/£2.74 for every £1,000 of repairs/write offs
- offset the emissions for replacement vehicles whilst the insured’s own vehicle is being repaired – think 2p per day (or 1.5p for an electric vehicle).
Isn’t that a small price to pay for climate change?
One of the advantages of physical assets is that the same asset could be carbon offset by multiple entities, creating a multiplication-effect that could make a traditionally dirty asset like a vehicle carbon positive! How? Imagine if the company manufacturing the vehicle (e.g Ford), the person buying the vehicle (John Smith), the bank financing the purchase (e.g. Lloyds), the insurer insuring the car (e.g. Admiral) and the energy provider selling the fuel (e.g Shell) all committed to offsetting the total carbon for that same vehicle. We’d then be in a position where the original emissions are offset by 400%!
How easy is it to make this happen?
That’s the incredible thing – it couldn’t be easier for your business, department or team to make this happen today. We have an API that enables you to purchase carbon credits in real-time based on any event you define (i.e underwrite new policy, renew policy, make a claim) so you can be up and running in hours, but if APIs aren’t your thing, just tell us the amount of credits you need (or ask us to calculate it) and we’ll do the rest. We’re offering this service free of charge as a force-for-good to help the insurance sector positively contribute to climate change. Plus if you do want to use our platform as part of your carbon zero strategy (e.g. by using remote inspection tools instead of sending adjusters on-site, or by converting a paper based process with a digital customer self-serve… the list of marketplace solutions is endless) we offset the cost of those services with platform credits, so you can automate your operations at no cost! Now that’s an easy business case to make internally!
Our insurtech gateway acts as the ‘glue’ for assembling fully touchless, next-gen customer experiences in the cloud that leverage best-in-class solutions from global insurtechs. If you would like to test any of the solutions or see them working side-by-side, reach out to us at hello@claimtechnology.co.uk or sign up for a trial account at www.claimtechnology.com.
