Earlier this year, the European Commission published its EU Climate Resilience Dialogue report, addressing ways to reduce the climate protection gap and strengthen resilience to climate change across Europe.
The report outlined a series of actions, best practices and potential solutions to reduce the protection gap. Among its findings, the research highlighted the critical role insurance – and crucially, the claims sector – has to play in reducing the impact of long-term, non-linear and systemic climate risks.
Pinpointing insurance as one of the key elements of the ‘coping capacity dimension’ of climate risks, it noted that the increasing frequency and severity of extreme weather events may impact the availability and affordability of insurance coverage across all perils and hazards.
While the report outlined the need for increased insurance penetration for climate-related risks, it also noted that as an intangible product, its purchase relies heavily on trust that insurers will fulfil potential claims. As such, it identified product simplicity and clarity in contractual language will be critical to reducing some of the demand-side barriers to the uptake of insurance.
In conversation with Insurance Business, director of property & real estate at Charles Taylor, Julian Strutt (pictured left) and Peter Farrelly (pictured right), COO of Sedgwick UK, each emphasised the role the claims sector plays in creating a more sustainable property insurance market. As environmental concerns and regulatory pressures mount, Farrelly said, it is now more important than ever to implement sustainable practices and drive market transformation.
Each company in the insurance industry has a responsibility to collectively contribute to protecting our environment. Damage management and mitigation experts now advise on the most carbon-efficient methods for disaster recovery projects. These professionals evaluate options such as restoration versus full reinstatement, always with an eye towards minimising environmental impact.
Also critical to bear in mind, Strutt said, is that in the property claims sector, sustainability goes beyond just the materials used to carry out reinstatements and repairs, and the environmental efficiency of the methods used.
“Insurers have their own net-zero targets and they’re now pushing these down their supply chains,” he said. “One clear example in the property sector is the push to keep material out of landfill. Can damaged items be resold, recycled or upcycled? For example, in the past, damaged solar panels would be thrown away.
“Now, they can be recycled for their constituent parts. This is positive from an environmental point of view and recycling can also generate an income from what were previously viewed as waste materials. This helps insurers manage their claim costs.”
The sector is driving innovation in salvage and repurposing, Farrelly said. Where previously damaged goods might have been written off, there’s now a focus on saving materials, repurposing stock, and reducing the carbon emissions associated with manufacturing replacements. This approach not only reduces waste but also opens up new possibilities for circular economy practices within the insurance industry.
From Strutt’s perspective, the insurance industry is now looking at sustainability in a much more sophisticated way. Offset schemes aren’t enough anymore, he said. Tradespeople working throughout the property claims sector need to understand sustainability and have defined practices and protocols in place – even those at the smaller end of the scale. How do they sort waste materials? What recycling partners do they work with? Can they repair as well as replace?
Looking to the future, Strutt said that the approach to sustainability in claims is an area where he expects to see a lot of change in the coming years. “In many cases,” he said, “a single problem such as a broken marble tile might lead to an entire new floor being laid. Is there a way for insurers and policyholders to repair rather than replace the tile, even if it’s not a perfect match? Could insurers create wordings that offer repair rather than replacement or incentivise policyholders to accept alternatives to full replacement when they’re not necessary?”
The claims sector is pushing the boundaries of traditional insurance principles, Farrelly said. While the standard approach has been to reinstate property to its pre-incident condition, there’s a growing discussion around “building back better.” This involves reinstating properties in more energy-efficient forms, which, although potentially more costly upfront, can lead to long-term environmental benefits.
“It goes without saying that legislation is key to creating a more sustainable property insurance market,” he said. ”For instance, new legislation in Scotland prohibits replacing gas boilers with similar systems, instead mandating more environmentally friendly options like air source heat pumps. Claims professionals are essential in understanding these changes and ensuring that reinstatement projects comply with current and upcoming regulations.
“By setting standards for sustainable practices and sharing knowledge with insurers and policyholders, claims professionals are helping to increase awareness and drive collective action towards sustainability goals. This educational component is key to fostering a market-wide shift towards more environmentally friendly practices.”
What is clear, Strutt said, is that the property claims sector is already helping to make the wider insurance market more sustainable and it will continue to be a driving force in that journey for a long time to come.
“Overall, I would say that the claims sector is critical in creating a more sustainable property insurance market,” Farrelly concluded. “It serves as the practical arm of the industry’s sustainability efforts, translating high-level commitments into tangible actions on the ground. As the sector continues to innovate and adapt to new environmental challenges, it will undoubtedly play a central role in shaping a more sustainable future.”
