How digital innovation is driving ESG in insurance

For insurers, ESG (environmental, social and governance) principles are no longer just an investment in the future. They are urgent, timely concerns with pressure to act on coming from all sides — including customers, investors, regulators and competing business leaders.

Sustainability, in particular, has become impossible to ignore as we all witness the increasingly serious effects of climate change. And many customers are demanding it, with data from the consulting firm Wavestone finding that 67% of American consumers view sustainability as a priority for insurance companies. Meanwhile, a whopping 96% of G250 companies — the world's largest 250 businesses by revenue — now report on sustainability or ESG.

Insurers are finding themselves facing the effects of climate change, as they deal with the aftermath of climate events for homeowners, drivers and more. To thrive in the future, insurance providers must evolve from carriers of risk into true resilience partners, aligning with customer values while also protecting them from the new risks they're facing.

New digital technologies — from predictive analytics to satellite mapping and connected devices — will play a huge role here, allowing this evolution to take place in a way that benefits both providers and their customers. Below, we've outlined four key ways that digital innovation is helping insurers practice ESG principles in a real, meaningful way.

Promoting efficiency with telematics

Telematics have long been a part of many providers' auto insurance offerings, and for good reason. These devices allow insurers to promote safe driving practices and, in turn, offer lower rates and increased flexibility to their customers.

However, these devices can also be used to promote sustainable driving practices, through rewarding energy-efficient routes and discouraging wasteful behaviors like idling and harsh braking.

These practices are a logical next step for any insurer who is already using telematics, as they can also reduce the risk of accidents and unneeded maintenance. It's a true win-win-win for safety, cost and sustainability at large.

The problem, however, is awareness. Research from Consumer Reports shows that less than 30% of drivers knew about their providers' telematics program, meaning there's clearly a gap between the benefits of this technology and how it's being marketed.

If insurers can get customers on board, though, the benefits could go beyond auto insurance. It's true that household telematics are in much earlier stages, but in the not-so-distant future, insurers could offer lower premiums to homeowners who utilize energy-efficient practices at home, like turning off their HVAC and lighting when they're away.

Cleaning up the claims process

In its simplest form, a more sustainable claims process involves paperless documentation, an undertaking most insurers have probably already begun in some form or another.

But there are opportunities left to tap, including an embrace of virtual inspections and replacing expensive and environmentally costly travel for claims adjusters with a virtual visit that saves time for everyone. There will always be exceptions where travel is needed but, when possible, it's an easy way to cut costs and make a tangible impact at the same time.

Additionally, providers can adjust their claims process to prioritize repairs over replacement, as this reduces waste and helps customers embrace sustainability on their own terms.

Navigating risk with data-driven insights

Insurance providers must also reckon directly with the realities of climate change, using new tools and technologies to proactively mitigate harm.

Consider this: In 2024, there were 27 climate-related disasters that created $1 billion or more in damages, an unbelievable uptick from the 1980s, when there were around three such disasters per year on average.

The costs of climate change have never been higher, and yet many homeowners remain unprepared. Here, insurers can become true partners, using advanced data to suggest preventative behaviors in the places most vulnerable to these disasters. That could include incentivizing storm-proofing measures in communities at risk for hurricanes, or promoting fire-prevention tactics in areas where wildfires are becoming increasingly common.

Improving parametric insurance

Parametric insurance, which has long been tied to natural disasters, is also becoming a more compelling way for providers to help their customers prepare.

This is because data for predicting and measuring these disasters has never been better, with advanced satellite mapping and AI analysis tools helping insurers track storms in real time and measure the exact features of their extremity — everything from wind speed and rainfall to the total affected area.

In parametrics, these tools could be transformative, helping providers create accurate parameters for all kinds of coverage. It's a development that's gravely needed, with data showing that, as recently as the 2010s, 83% of the global economic losses from floods were not covered by insurance.

This is yet another tool in the ever-growing box of digital solutions that insurers can use to enact sustainability-focused policies. Providers will have to be proactive in their approach in order to satisfy consumer needs while doing their part to face a global problem head-on.