Liability, household contents, planting trees: What is behind “green” insurance, how does the industry want to become more sustainable and what should consumers pay attention to?
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Neuharlingersiel – Hailstorms in cars, flooded cellars and uncovered roofs: Climate change and the associated extreme weather are costing insurance companies money. For this reason alone, the industry is likely to have a certain vested interest in sustainability. Henning Bernau from NV Insurance in Neuharlingersiel, directly behind the dike and within sight of the North Sea, is aware of this. The nationwide insurer from East Frisia has been focusing more on sustainability for ten years – and, according to board member Bernau, has learned a lot in the process. Sustainability has many facets for insurers. They can position themselves sustainably as a company and employer, through their products and as a player in the financial market. But what does that mean and what should consumers look out for?
How much is the industry concerned with this?
“The insurance industry is very concerned with sustainability,” says Jegor Tokarevich, who teaches at the University of Oldenburg and, as managing director of the London-based consulting and reporting service provider SOF, deals full-time with regulation in the banking and insurance sectors. Providers of sustainable financial products, and thus many insurers, are now subject to disclosure requirements. The EU is increasingly requiring these companies to report how sustainably they act and to provide evidence of this.
In fact, a data survey conducted by his company has shown that insurers invest less than two percent of their capital sustainably in accordance with statutory taxonomy criteria, reports Tokarevich. The operational effort and hurdles are very high. In addition, there is the risk of making oneself vulnerable to greenwashing. Sustainable investments in a broader sense, for example with self-established lists of criteria, are widespread.
What does sustainable even mean?
For Tokarevich, this question presents a fundamental problem: “We are not talking about exact mathematics here, but about an emotional, abstract and politically motivated issue.” How difficult it is to come up with a binding definition of sustainability is demonstrated by the fact that we are discussing military spending differently today than we did before the Ukraine war.
“That’s why, as a private investor, I first have to consider what is sustainable for me,” advises the industry expert. “And in the second step, I can check whether my values match those of the insurer. If that’s the case, then I have to look at their methodology: How do they measure their sustainable commitment?”
How does an insurer specifically approach the issue?
For Bernau, sustainability is a constant learning process. Ten years ago, NV Insurance began with the classic advertising promise of one new tree per contract. These were planted in Asia or Africa. “We assume that these trees exist. But we have not seen them ourselves,” says Bernau today. So the insurer first switched to planting campaigns in Germany, then to the targeted reforestation of local forests damaged by storms and bark beetles. This year, for example, NV Insurance contributed 6,000 seedlings to Garrel and Molbergen (Cloppenburg district). There was also another project on its own doorstep: the recovery of so-called ghost nets, in which sea creatures can get caught, from the North Sea. In order to finance such projects, sustainable insurance is a little more expensive on the one hand, and the margin for the company is also smaller, explains Bernau.
Divers remove ghost nets from old shipwrecks off the East Frisian Islands.
Private
Divers have already recovered a total of 1.2 tons of such ghost nets from the North Sea during salvage operations.
NV Insurance/Schipper
“The key for us is to make it as simple and as understandable as possible,” he stresses. That is why there are only three promises for sustainable products that the insurer sells under the “bettergreen” umbrella: Firstly, one ecological project is supported per contract. Secondly, the premiums are invested sustainably (according to a separate list of criteria). And thirdly, sustainable behavior is rewarded, for example by the home contents insurance contributing to the additional costs of replacing a refrigerator with an appliance with the highest efficiency class.
Henning Bernau is also involved in sustainability on the board of NV-Versicherungen. (Image:
What should insurance customers pay attention to?
When it comes to insurance, you should first and foremost pay attention to price and performance, advises Philipp Rehberg from the Lower Saxony Consumer Advice Center. “I don’t want to downplay sustainability. But the most important thing is whether an insurance product suits me and whether it provides optimal cover in the event of a loss,” he stresses. In general, the Consumer Advice Center advises against combining investments or retirement planning with insurance, as is the case with life insurance or pension insurance.
In a second step, for example, you could check what proportion of its capital an insurance company invests sustainably and how transparent its criteria are for this. With ecological projects, it is also important where and how these are implemented and how concretely they are documented. You could also question what proportion of the insurance premiums go into these projects. Rehberg also recommends not being blinded by seals or labels. You should ask who issues them and whether there is a publicly accessible audit report for the certified company.
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The market
According to a consumer study conducted by the EY management consultancy last year, sustainability is relevant for 84 percent of respondents when it comes to insurance. More than three quarters would switch to a sustainable insurance product. But the situation is different when it comes to willingness to pay: Not even one in five would pay more for sustainable insurance.
Henning Bernau from NV Insurance observes that younger people in particular are more interested in sustainable products. This impression is also supported by the company’s figures. According to them, 38 percent of NV Insurance’s “better green” customers are under 25 years old. For conventional products, this age group makes up 22 percent.
