Sustainability is transforming the insurance industry, regulatory landscapes, and strategies, impacting customer expectations and decision-making processes globally.
A Wavestone study, “From Policy to Practice: Understanding ESG Expectations of Insurance Customers,” examines the impact of sustainability on insurance customers’ decision-making processes, involving data from over 7,000 customers across the USA, Canada, the UK, Switzerland, France, and Germany. It explores the expectations of insurance clients regarding their environmental, social, and governance (ESG) from policy to practice.
The study aims to comprehend the environmental, social, and governance (ESG) expectations of insurance customers throughout their entire customer journey.
Key findings:
- Sustainability priorities vary across markets: Sustainability priorities vary across markets, with social aspects of ESG being the top concern in Europe and Canada, Swiss and German customers prioritizing social responsibility, and environmental factors dominating in the USA. However, a significant portion of customers do not consider sustainability. Customers prioritize price, coverage, and claims processing efficiency, requiring ESG-aligned insurance offerings to be tailored rather than universally appealing.
- The willingness to pay for sustainability: Sustainability is not universally accepted, with customers’ willingness to pay for sustainable insurance products varying by country and type. Switzerland, France, and the USA offer an average 10% higher premium for ESG-aligned insurance products, while Germany and Canada offer a 5% higher premium, and the UK has a lower willingness to pay.
- Regulatory impact and opportunities for insurers: Regulatory frameworks, particularly in Europe, are promoting transparency and innovation in insurance, with initiatives like the EU Taxonomy and Corporate Sustainability Reporting Directive pushing insurers to integrate ESG into governance, products, and processes. However, lightly regulated markets like the USA face risks of greenwashing due to a lack of oversight.
Insurers in these markets may promote ESG initiatives without substantiating claims, leading to skepticism among customers and complicating the positioning of sustainability in insurance policies. - A trust-building opportunity: The study reveals a strong link between sustainability perception and customer loyalty, with insurers exhibiting sustainable practices gaining higher Net Promoter Scores. However, some customers prioritize financial protection, reliability, and claim processing, making ESG initiatives less influential.
ESG initiatives are considered neutral for this group, unlikely to increase engagement unless they provide clear financial or service-based benefits. - Generational and family-driven sustainability preferences: Younger generations (18-34 years) and families with children under 18 are leading the sustainability movement, exhibiting higher awareness of ESG dimensions in insurance and more likely to include sustainability in their decision-making process. However, older customers and those without children show lower engagement with sustainability topics, reinforcing the need for segmentation and prioritizing ESG integration.
- Product innovations to bridge the gap: Insurers are introducing innovative sustainable products, such as “pay as you drive” motor insurance and green building reconstruction options, to address challenges like uninsurability in high-risk sectors.
In markets with lower ESG enthusiasm, insurers can integrate sustainability features without increasing costs by embedding sustainability principles into standard offerings, appealing to both ESG and cost-conscious customers. - Customer-centric claims management: The claims process is transforming into a hub for ESG integration, utilizing digitization to reduce emissions, sustainable repairs, and proactive loss prevention to enhance customer satisfaction and trust.
The success of digital claims and sustainable repair options depends on their framing, with some customers enhancing their experience while others may see them as efficiency improvements.
Conclusion:
Sustainability influences insurance customers’ decision-making, requiring companies to adapt their strategies to meet evolving regulations and modern customer expectations. By embedding sustainability across the value chain, insurers can enhance customer satisfaction, build a competitive brand, and increase resilience to regulatory changes. Balancing sustainability integration with core insurance fundamentals ensures relevance across all customer groups.
The future of insurance sales lies in holistic ESG integration—aligning customer preferences, regulatory requirements, and sustainable practices, said Jasmin Schreg, Managing Consultant and Insurance Expert, Wavestone.
