What is green insurance, and does it reduce personal and business premiums?

The focus on green insurance is being driven mainly from the European Union. This is due to green insurance being one part of the sustainable finance jigsaw and the EU's prioritisation of sustainable finance as the path to achieving the goals of the Paris Climate Agreement and the EU Sustainable Finance Action Plan which have, at their core, the objective to make Europe climate neutral by 2050.

Retail green insurance

Retail green insurance refers to the new and emerging green insurance products that are being offered on the market, such as life insurance policies with underlying green investments, home insurance policies offering reduced premiums for flood proofed homes, pay-as-you-go motor insurance, and discounted insurance premiums for buildings which have been modified to be more energy efficient.

John Lowe, aka the Money Doctor, talks about the impact of green insurance on his day-to-day living. He went all-in electric back in August of last year and enjoys a 511km per single change to his electric vehicle and seven totally free charging platforms 20ft from his office.

“Car insurance companies use a range of factors when calculating your car insurance. Some of these relate to the type of car you drive and others to you as a driver.

“But in the main, electric car premiums can be up to 10 per cent cheaper than petrol or diesel car insurance. So, as well as the benefits of cheaper running and fuel costs, you can now save on your insurance premium – do shop around.”

Corporate green insurance

Green insurance is even more relevant to the corporate world where (re)insurers conduct their business and integrate ESG and sustainability factors into their operations including, critically, into their risk-management systems, governance framework, management structures, underwriting activities, asset-management framework, investment strategy and product oversight and review procedures.

Marguerite Sinnott is senior associate in insurance at William Fry LLP, which is only one of only five Irish law firms to be ranked in the inaugural The Legal 500 Global Green Guide.

Sinnott explains: “Our clients are very conscious that green insurance is here, is constantly evolving and covers a very broad-spectrum, including issues related to diversity and inclusion, supply-chain management, community relations.

“[Re] insurers are having to allocate significant resources to be and stay compliant with new sustainability requirements and we are supporting clients in the conduct of root and branch reviews of their entire business to meet regulatory, legal, supervisor and consumer demands and ultimately to deliver the overall goal of achieving sustainability at all levels of their business.

“This involves advising our [re]insurer clients on their multi-faceted approach to green insurance, including from the perspective of the various roles they play in the industry, for example, as product producer [in terms of general insurance and insurance investment products], asset owner, underwriter, risk manager, long-term investor, regulated entity and financial advisor.”

Buyer beware – greenwashing

Going green is becoming a profitable business strategy, with a new market of environment followers and supportive government policies to help the industry grow.

The term originated in the 1960s when the hotel industry devised one of the most blatant examples of greenwashing. They placed notices in hotel rooms asking guests to reuse their towels to save the environment. The hotels enjoyed the benefit of lower laundry costs.

Greenwashing – also called green sheen – essentially refers to the act of portraying an organisation’s product or services as environmentally friendly only for the sake of marketing. In truth, the product or service doesn’t have or hardly has any environmental benefits.

So how can people be sure ‘green insurance’ is genuine?

Sinnott says: "Green insurance is a priority at an EU and wider global level. This is demonstrated by the raft of EU and domestic legislation, regulation and guidance published over the past several years and which continues to be published at an unprecedented pace and in large volumes. The will to further 'green' the insurance industry is also seen in EIOPA and Central Bank supervisory approaches. Although there will always be a risk of greenwashing, consumers are advised to only obtain information from reputable players and reputable sources and then fact-check the information provided to them."

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