It’s time for insurance to establish data standardization

As sustainability becomes more of a focus for insurance stakeholders and customers, the industry must establish data standards to improve the quality of environmental, social, and governance (ESG) disclosures by insureds.

It all came together at a forum held by global reinsurance group Chaucer in late January. Chaucer’s sustainability experts emphasized that a uniform measurement and reporting methodology will enhance tracking of progress and increase trust among stakeholders.

James Wright (pictured), chief risk officer at Chaucer, said: “Our key message was to rally the industry to consider standardizing data and making insurance an easier product to sell.” said.

The call for standardized ESG metrics also resonates with concerns about the burden placed on brokers, who face a barrage of disparate surveys from different insurance companies.

Mr. Wright emphasized the need to work together to address data standardization challenges and streamline processes to reduce inefficiencies and customer dissatisfaction.

“Standardizing sustainability-related information will benefit customers, intermediaries and carriers alike,” he said. Insurance business.

Sustainability – challenges and opportunities

Apart from data standardization, Chaucer’s Sustainability Forum also addressed other relevant industry issues related to sustainability.

Discussions included the evolving status of ESG regulations, their impact on performance metrics, and the complexities surrounding carbon offset and decarbonization efforts.

One of the points highlighted at the forum was the major hurdles to achieving industry-wide standardization. For example, sustainability metrics are subjective, and certain data points, such as social impact or a company’s carbon footprint, can be difficult to quantify.

“There is no clear definition of what is ‘good’ in sustainability or ESG. Different stakeholders prioritize different aspects,” Wright explained. “Some companies are very concerned about the environment and its importance. Others are more focused on social causes. How do you turn that into data? It’s incredibly difficult. Therefore, we believe there is a core set of information and data that we fully expect will be of interest to the majority of stakeholders.”

The role of data quality in ESG disclosure

Regarding the role of technology in sustainability efforts, Wright acknowledged its potential, but emphasized the importance of data quality and reliability.

“While technology can help with data collection, ensuring robust and reliable data remains a challenge. Stakeholders must ensure data accuracy to avoid pitfalls such as greenwashing and regulatory challenges. It has to be a priority,” he said.

“When we talk about the data we want to collect, it’s not just about standardizing the data. It’s also about improving the quality and robustness of the data to support informed decision-making.”

Addressing regulatory challenges is another important aspect of sustainability efforts. Industry players must stay abreast of regulatory developments to ensure compliance and strategic alignment.

“Regulatory requirements are fragmented but evolving. Harmonization and expanded regulatory coverage are on the horizon,” Wright said.

Lastly, Mr. Wright mentioned the increasing focus on decarbonization.

While it is important for organizations to reduce carbon usage and utilize carbon offsets to achieve net-zero targets, we caution against overlooking the risks associated with carbon offset projects and ensure that robust risk A management strategy was proposed.

“Offsetting[carbon emissions]is important, but it is equally important to understand the risks involved. We are exploring insurance solutions to reduce the risks associated with offsetting projects.” said Wright.

After the Sustainability Forum, what’s next for Chaucer?

Reflecting on next steps, Wright outlined continued efforts to standardize data and foster collaboration and engagement within the industry. Coordination between brokers and carriers will be critical, as brokers can provide a realistic view of achievable goals and “bring a sense of realism” to discussions.

“The involvement of large brokers in standardizing the approach has led to significant improvements in this regard,” Wright commented.

Chaucer will continue to engage with market groups and stakeholders, advocating a standardized approach and transparency. Mr. Wright also highlighted the Moody’s and Chaucer partnership on the ESG Balanced Scorecard, which provides a standardized framework for assessing sustainability performance, as an important part of Chaucer’s work.

The scorecard uses up to 158 unique data points to assign scores across a variety of ESG factors, including greenhouse gas emissions disclosure, employee health and safety, and board diversity, to help insurers to better understand the current ESG performance of their customers. It can also adapt to sustainability priorities that evolve over time.

“The Balanced Scorecard allows us to align our sustainability goals with the United Nations Sustainable Development Goals and provides a unique framework for evaluating ESG performance,” he said.

Ultimately, improving data quality and standardizing data is a collaborative effort across the industry.

“Some colleagues I’ve talked to are grappling with the same problems Chaucer has in getting good data,” Wright recalled. There is no one who can defeat you in this regard. This is where we can really improve as a market. ”

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