Zurich is the latest leading insurer to pull out of the Net-Zero Insurance Alliance in a move that suggests cross-party co-operation is difficult to achieve. Zurich’s decision follows Munich Re pulling out in March 2023; both were founder members as well as leading global players. While collaboration is often difficult due to competition between insurers, environmental, social, and governance (ESG) and climate change appeared to be a cause that could bring insurers together. Yet the future of the alliance now looks in doubt following these two high-profile withdrawals.
GlobalData findings suggest that customers do care about an insurer’s record on sustainability. Our 2022 UK SME Insurance Survey asked respondents to rank sustainability in importance between one and five (with five being very important). 65.3% of SMEs ranked it either four or five (effectively ‘important’ or ‘very important’). A similar trend was seen in GlobalData’s 2022 UK Insurance Consumer Survey, where 41.4% of consumers were willing to pay a higher premium (to various degrees) for an insurance policy from a provider with a good record on sustainability.
However, both surveys found that when respondents were asked to rank ‘an insurer’s reputation in ESG’ against other factors at the point of purchase, it was the least important factor for both consumers and businesses. Yet while it trails factors such as the price of premiums, customers do think insurers being proactive in ESG is important. Despite leaving the Net-Zero Alliance, both insurers Zurich and Munich Re have reiterated their commitment to long-term ESG targets. But it may be harder for the industry to combat climate change as a unified front without an industry-wide collaboration. This may disappoint customers.
It also highlights the difficulty in forming collaborations within competitive industries. For example, the blockchain-focused B3i group collapsed in 2022. This was a consortium of 20 leading global insurers that were exploring how to utilize blockchain technology within the industry. While this is a different theme altogether, it is another example where co-operation was short-lived.
Overall, leading insurers need to keep increasing their push towards net zero, which will benefit them due to the significant costs of severe weather events. Meanwhile, going forward, customers will only demand more action from businesses they give their money to. The potential collapse of this net-zero collaboration group would be a step backwards for the industry’s response to climate change.