As we approach 2024, one key topic that has gained significant regulatory interest in the insurance sector is ESG (Environmental, Social and Governance). As the world turns its focus to preserving the environment and uplifting social governance, insurers are expecting to see regulators enforce more robust ESG reporting requirements in the next two years. To support insurers to prepare for this regulatory shift and ensure compliance as new legislation sets in, Archana Acharya – Chief General Counsel, unpacks the key strategies insurers can leverage to stay ahead next year.
Keeping up to date with the regulatory landscape
Historically, ESG reporting has been voluntary in Australia, however, a new era is fast approaching. Regulatory bodies such as the ACCC (Australian Competition and Consumer Commission) and ASIC (Australian Securities and Investments Commission) are now directing their focus towards ESG-related actions. Regularly monitoring updates from regulatory bodies will provide insurers with the insights needed to align their practices with evolving standards, to help maintain compliance in the years to come.
Developing robust ESG policies and strategies
Insurers must establish clear ESG policies and strategies. This involves integrating ESG considerations into key business functions such as underwriting, investment decisions and risk management. Partnering with a strategic claims partner can help insurers conduct comprehensive ESG risk assessments to determine risks associated with insured entities, helping insurers understand and quantify potential exposures. Crafting policies that also align with broader business objectives ensures a comprehensive and cohesive approach to ESG integration.
Employee training and awareness
The success of any ESG strategy depends on the understanding and commitment of employees. Insurers should invest in training programs to raise awareness about ESG issues and their implications. From underwriters to senior management, everyone should be equipped to contribute effectively to the company’s ESG objectives. CPA Australia has launched practical resources designed to help businesses gain insights into ESG and understand its impact on business operations, which can be viewed here.
Transparency through enhanced reporting and disclosure
Transparency is key in the ESG era. Enhancing reporting and disclosure practices, aligning with globally recognised frameworks, can help insurers communicate their ESG efforts to stakeholders clearly. This transparency builds trust among customers, investors and employees, fostering a positive reputation in the industry.
Utilising ESG data and metrics
Technology and data analytics play a pivotal role in assessing and managing ESG risks. Insurers should invest in tools that enable them to model the impact of ESG factors on their portfolios. Data-driven decision-making will be essential in navigating the complexities of the evolving ESG landscape in 2024 and beyond.
Collaboration and industry partnerships
Collaboration is a powerful tool. Insurers should actively seek partnerships with industry peers and government bodies to share best practices and collectively address common ESG challenges. Collaborative efforts can amplify the impact of individual initiatives and contribute to the industry’s overall sustainability goals. One other approach is to partner with a strategic claims management provider like Gallagher Bassett.
Book in for a free consultation to learn how Gallagher Bassett can support you.