Sustainable underwriting: How insurers can account for ESG risks and enable dynamic pricing

Environmental, social and governance (ESG) matters are having a major impact on the insurance industry, with profound effects being felt across the business, from new product development to investment strategies to brand positioning. ESG is shaping the c-suite agenda, too, with more insurers questioning whether they should provide coverage to coal plants, oil pipelines and other carbon-intensive businesses. These can be difficult decisions when certain customers can cause increased loss ratios due to climate-driven natural catastrophes, litigations related to social and governance issues.

However, traditional underwriting approaches are not sufficient to identify and manage the complex risks presented by climate change and a new underwriting approach is necessary for managing ESG risks. Tomorrow’s top performers will integrate AI-enabled tools and machine learning into their underwriting workflows to enable dynamic pricing and realise the benefits – including increased efficiency, improved risk selection and more profitable pricing.

This content highlights how insurers can seize ESG as an opportunity by developing meaningful ESG scores for rating and pricing risk by integrating data from a diverse range of sources and automating workflows.