Sustainability policies usually cost money. Which means that the claims department is instinctively opposed to any such moves. Where the initiatives can demonstrably save money – such as the use of ‘green’ parts in the motor repair sector – then the claims department will welcome it with open arms.

Herein lies the fundamental dilemma of the sustainability agenda, insofar as it affects the claims department. Sustainability is good. Cost increases are bad.

Protecting the earth’s precious resources is a laudable ambition. But if the claims department must pay more, wait longer, or invest for the longer term then the arguments may well fall on stony ground.

Woe betides the Claims Director who presents an annual budget that includes any cost increases attributable to environmental causes. For example, the accident repair sector has for years been seeking to recover legitimate incurred costs from their insurer clients for a range of environmental protection measures, but without much success. Safe disposal of hazardous waste, EPA charges, and parts recycling are just a few instances. However, there has been an expectation by the claims department paymasters that these types of costs should be absorbed. So there has been little incentive to broaden and deepen the sustainability agenda in the face of this type of client intransigence.

Slow Progress, Baby Steps

Of course, it is not all bad news. We can sense some changes as the ESG agenda (Environment, Social & Governance) is being forced nearer to the top of the corporate consciousness. We can already see how the underwriting department is using ESG assessment and ratings to help determine risk in the commercial sector. Zurich Insurance has established its Climate Change Resilience Services to share its specialised expertise with commercial customers. Allianz has identified 13 business areas in which there is special consideration of ESG issues before investments are approved – sectors such as mining, defence, and the sex industry.

These corporate group initiatives are welcome, but they are merely the tip of a very large iceberg in which corporate culture at the operational level is a massive barrier to progress.

“Whatever progress is being made it can only be viewed as a mere first step in a very long journey.”

I have never seen, for example, an assessment of ESG implications for the expense and indemnity spend in the internal annual report of the claims department. I have never seen a potential supplier rejected on the grounds of ESG incompatibility (especially if they are less costly than their competitors). I have never seen a new environmental protection initiative triggered by the claims department that results in the insurer incurring additional cost – even if it is the ‘right thing to do’.

Whatever progress is being made it can only be viewed as a mere first step in a very long journey. Within the claims function especially there is an in-built and institutionalised hesitancy that is yet to be addressed and support for ‘green’ parts or similar initiatives barely scratches the surface of requirements during the coming decades.

New Rules, New Politics

Regular readers of this column will know that a common theme in many of my articles is to demand a new style of leadership and advocacy from the claims department. From the Claims Director downwards there needs to be a new awareness of broader responsibilities above and beyond the mere settlement of claims. This is certainly true of the sustainability agenda but, in this instance, it will not be enough.

If, as I surmise, ESG adherence and advocacy will increase costs in claims management, supply chain, and indemnity spend then it is only the very highest echelons of the C-Suite that can sponsor this new approach. Tasked primarily with reducing spend and simultaneously improving the customer experience, the Claims Director alone will not have the political influence to resist the siren calls of those voices who will continue to urge caution.

So, to those CEOs out there who proclaim their support of the sustainability agenda, the first call you should make is to your Claims Director. They have the talent and the capability. You have the power and the desire.

I wish you well in your endeavours.