In a sure sign that the global warming denial movement is losing ground quickly, some of the world’s most calculating businesses, including the insurance industry, are paying more attention to climate change — and voting with their dollars.
In the long run, the political bickering over climate policy might not seem so important if the country’s largest companies start to take the issue seriously. Proof that climate is more than just a theoretical concept for corporations comes from a study published recently in the journal Science.
“Weather- and climate-related insurance losses today average $50 billion a year. These losses have more than doubled each decade since the 1980s, adjusted for inflation,” said lead author Evan Mills, a scientist in Lawrence Berkeley National Laboratory (Berkeley Lab)’s Environmental Energy Technologies Division. “Insurers have become quite adept at quantifying and managing the risks of climate change, and using their market presence to drive broader societal efforts at mitigation and adaptation.”
Mills said the insurance industry, the world’s largest business with $4.6 trillion in revenues, is making larger efforts to manage climate change-related risks.
Hurricane Sandy is only the most recent U.S. example of the kinds of increasing liabilities posed by severe weather events in a changing climate.
Managing a portfolio of $25 trillion in assets, similar in size to mutual funds or pensions globally, the insurance industry has become a significant voice in world policy forums addressing the issue, as well as a market force, investing at least $23 billion in emissions-reduction technologies, securities, and financing, plus $5 billion in funds with environmental screens, seeing risks to investments in polluting industries and opportunities in being part of the clean-tech revolution.
According to the study, 1,148 climate change adaptation and mitigation activities have emerged from 378 companies in 51 countries, representing $2 trillion (44 percent) of industry revenue. For example, insurers have brought at least 130 products and services to market encouraging the spread of more energy-efficient homes and commercial buildings by paying claims that encourage rebuilding to a higher level of energy efficiency after a loss. At least 65 other insurance industry products address the risks and opportunities of the renewable energy industry.
Pay-as-you-drive insurance policies, now numbering nearly 3 million, offer auto insurance based on number of miles driven rather than a fixed premium. GPS technologies verify driving distances, and policyholders benefit from a more accurate insurance premium. The price signal of lower premiums for miles actually driven could reduce U.S. driving by 8 percent, and oil use by 4 percent, reducing the cost of driving by $50 to $60 billion per year because of a lower chance of accidents and reduced traffic congestion.
Insurers get what politicians apparently don’t — there’s profit in being smart, and loss in not.
In affiliation with Summit County Voice. Photo of Hurricane Sandy flooding in Haiti by Logan Abassi/UN