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The great potential of sustainable insurance products

by Michaela Duhr / 16. January 2023

‘ESG is becoming crucial to the success of customer acquisition’


More and more customers are interested in sustainable insurance solutions, according to the findings of several studies. For instance, in the study titled ‘The relevance of ESG in the insurance market’, PwC’s strategy consulting team Strategy& discovered that half of all insurance customers want to take ESG criteria into account when choosing an insurer in the future. Furthermore, over 60 per cent would even be prepared to pay a premium. ‘ESG is becoming crucial to the success of customer acquisition’, conclude the PwC strategists in October 2022.


In the eyes of customers, ESG is becoming a prerequisite that is simply self-evident according to Gero Matouschek, a partner at Strategy& Germany. ‘Therefore, the best opportunities for insurers to generate income lie in a wide range of products with fully anchored sustainability principles, complemented by supplementary ESG-specific products and services.’ Customers expect sustainable products and services from a sustainable company, says Matouschek. Customers’ expectations have changed, he says, and insurers should respond to them.


Sustainability triggers sympathy and supports sales


Released in December 2022, the trend study ‘Gen Z and sustainability for insurers’ conducted by the market research and consulting institute ‘Heute und Morgen’ reaches a similar conclusion. In addition to Gen Z (people aged 18 to 25, born after 1996), the study surveyed older generations. Interestingly, sustainability is not a generational issue first and foremost, even though an above-average number of people in Gen Z consider the topic attractive and relevant. In matters of investments, for example, boomers (born 1946 to 1964) attribute particular importance to sustainable investments offered by providers.


Jana Grüger, the director of the study, comes to the following conclusion with regard to the overall population: Sustainability triggers sympathy and may support sales without being the deciding factor to a greater degree. If, however, the supply of sustainable insurance solutions increases and insurers provide their customers with better information, customers would deliberately opt for sustainable insurers and insurance products if the prices were similar.


Actively driving the topic of sustainability


The insurance industry has recognised this and has already set itself ambitious targets (link to 1st blog article). Although the product landscape in life insurance in terms of sustainability is still relatively unsaturated, more and more life insurers are now pioneering sustainable insurance solutions in the market.


Signal Iduna: establishment of a new sustainable life insurer


It has been more than a year that the Signal Iduna Group has launched a new sustainability-oriented life insurer. All new life insurance business has been handled by Signal Iduna Lebensversicherung AG since January 2022. According to its own press releases, the insurer wants to take ESG aspects into account ‘all along the value chain’. Attention is being paid to sustainability not only in capital investments, but with all products.


The new company’s flagship product is the unit-linked pension insurance SI Global Garant Invest (SIGGI). The product factors aspects of sustainability into the savings and pension phases. Few insurers offer such an orientation for the pension phase, as surpluses are normally also allocated from the conventional premium reserve stock. Even the guarantee assets take sustainability into account.


Die Bayerische: sustainable private  and workplace pensions


In late 2021, Pangaea Life, the sustainable brand of the Munich-based insurance group Die Bayerische, launched ‘Pangaea Life Invest’, a private retirement pension scheme based on sustainable investments. The capital is paid into two Pangaea Life funds which make targeted investments in real assets in the fields of renewable energy (Blue Energy fund) and sustainable residential property (Blue Living fund). According to the company, the investments adhere to strict ecological, social and ethical standards.


‘Pangaea bAV Invest’, the sustainable workplace pension product launched by Die Bayerische in February 2022, also invests in these two funds. Pangaea Life promises its customers complete transparency about how their savings grow through investments in concrete, demonstrably sustainable projects. Both products received the Sustainable Finance Award in November 2022 (in the ‘E for Environment’ and ‘S for Social’ categories). The award is presented annually by the analysts from Morgan & Morgan.


Alte Leipziger: a new investment paradigm for sustainable investments


In August 2022, Alte Leipziger Lebensversicherung announced the addition of the new sustainable investment strategy ‘VisionGrün’ to its unit-linked pension insurance products. Anyone who enters into a retirement annuity contract with self-select funds will be able to pick this investment option. In this case, investors will only see those funds with either social or ecological characteristics or dedicated to sustainable investments.


All funds meet the requirements of Article 8 (financial products that promote social and/or environmental characteristics and invest in sustainable investments) or Article 9 (financial products whose investment strategy explicitly pursues sustainability objectives) of the EU Sustainable Finance Disclosure Regulation (add link).


According to the company, ‘VisionGrün’ ensures that all investments in the contract, including guarantee assets, observe ESG criteria throughout the term of the contract as well as in the pension phase. This also applies to changes of funds and additional payments. If any individual fund should no longer meet the criteria, alternatives will be recommended to the customer.


Seizing competitive advantages


This is merely a selection of life insurers which, instead of waiting for regulations from Brussels, are taking action in order to open up a highly promising market. They know that whatever company is able to position itself as sustainable with ESG-compliant products at the right time will gain a clear competitive edge and perform better in the long term.


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