Social Sustainability in Insurance: What, Who and How
EXECUTIVE SUMMARY
This paper explores the role of the insurance sector towards social sustainability, focusing specifically on its impact towards customers within the ‘S’ dimension of ESG (Environment, Social and Governance) considerations. It discusses the historical and current social roles of insurance, the populations it serves, and how it can contribute more positively to social outcomes globally. It also provides an update on regulatory developments in a European context. The authors argue that insurance can both positively and negatively impact social outcomes, and that the insurance sector as a whole must reflect how its practices can better serve society, while continuing at the same time to take into account commercial objectives and actuarial considerations.
The paper also discusses the potential pitfalls of underserving vulnerable communities. Vulnerability to loss is higher in unprotected communities where social deprivation is already high, and climate change impacts are anticipated to exacerbate that effect. The paper highlights how supporting such populations also represents an opportunity for the insurance sector, for instance in the illustrative use cases of microinsurance (in developing economies) or mental health insurance (also in developed regions like Europe).
The authors propose four recommendations for insurers: engaging openly with regulators and financial supervisors on social issues, designing, and expanding new customer impact measures for their underwriting activities, integrating social considerations into their underwriting and product strategies (also when introducing Artificial intelligence in their processes), and engaging proactively with all relevant stakeholders and partners in the value chain, including NGOs and civil society. The paper also emphasises the potential role of actuaries in analysing social risks, opportunities and impacts, and in implementing these recommendations, given their skills, experience, and perspective in assessing and mitigating risks. In the end, the authors call for further research and multidisciplinary collaboration to explore the complex social role of insurers.
