ESG is running like a train heading down the track towards the insurance industry, but while everybody can see it coming, nobody really understands what is required to be able to jump on that train and position their organisations to prosper from it.
Who will define how insurers develop acceptable ESG frameworks? Will it require a regulatory ‘stick’? Will insurers take the lead by writing ESG criteria into premiums? Will brokers stop accepting certain asset classes? Will investors demand adherence? Will insurance buyers ‘bubble wrap’ themselves with ESG conformity?
The answer probably lies with elements of all the above, but how will the journey to ESG adherence develop?
FWD worked with Mettle Capital to examine social and digital media commentators analysing commentary around the 26 ESG drivers established by the Sustainability Accounting Standards’ materiality map.
Using sentiment analysis and natural language processing we analysed 12 months data from April 2022 to March 2023 and organised it using Boolean search logic around each of the 26 drivers.
Additionally, FWD commissioned primary research amongst 250 UK commercial lines insurance brokers using its proprietary panel, Broking Now!
In terms of social media narrative on the insurance industry the drivers generating the most positivity Access and Affordability, Employee Engagement and Customer Privacy; conversely Product Quality and Climate Change generated most negativity. Themes generating the highest volume of commentary were Data Security and Product Quality.
Based on social and digital media commentary, the most profound ESG influences on the insurance vertical are primarily around ensuring products are well designed, well distributed, and affordable. Secondarily there is concern for data security. Given that insurance is a complex offering and the industry does not support a long manufacturing supply chain, this seems reasonable. Insurance is influenced by social drivers more than any others.
The survey of brokers found Social and Governance drivers are more important than Environmental ones. Data Security, Customer Privacy and Employee Health and Safety are the most important concerns (all Social), followed by Business Ethics and Management of the Legal and Regulatory Environment (both Governance). Respondents from large national and international broking houses tended to be distinct from respondents from Regional and Provincial firms.
FWD Head of Research, Julian Green said: “When reviewed alongside the broker survey, the social media and digital commentary analysis appears to be a reasonable indicator of the ESG direction being taken by the insurance industry. Greater emphasis in this analysis on product and distribution are not surprising, given the breadth of the commentators and as such, being consumers of insurance.
“The fact that the most positive and important drivers were in the social element of ESG, with a smattering in the Governance element also resonates with the findings of the broker survey. This must surely give insurers and its ecosphere confidence in the knowledge of where to place its resource and emphasis when adhering to ESG compliance. Effectively managing Social aspects along with Business Ethics and regulatory adherence are key as insurers navigate the ESG landscape”.
