Climate change is increasingly on the radar of business sectors around the globe, as companies become more driven not only to adapt to its impacts but also to put in place policies that can help to protect the environment.
And the health sector is on the frontline as climate change can affect the health of their customers on one hand, and the power they have to affect global warming through their investment portfolios on the other.
From scorching heatwaves in Zimbabwe to apocalyptic wildfires in California, on a customer level climate change can bring about an increase in health risks in many different ways.
Extreme weather event including heatwaves, floods, wildfires, and hurricanes can cause increased injuries, heat-related illnesses, respiratory problems, and mental health issues. That can translate to higher healthcare utilisation, resulting in higher claims costs for insurers.
Higher temperatures can also cause a spread of more infectious diseases – especially mosquito-borne diseases like malaria, dengue, zika and chikungunya.
Increased outbreaks would also increase healthcare costs. .
But the negative effects on the health insurance sector are wider than just an increase in policy costs, and can affect the way international companies handle their investments.
Health & Protection spoke to advisers from around the world to find out how climate change is viewed in their locations, and what, if anything, the industry is doing to adapt and/or bring about positive change.
A view from Zimbabwe
Allan Sixpence, managing partner at Victoria Risk Services said: “We are definitely affected by climate change.”
Sixpence was speaking from Harare, where the effects of climate change were foremost not just in his mind, but the in the minds of citizens throughout the Zimbabwean capital.
Harare was going through a heatwave at the time, with temperatures of up to 44 Celsius and high humidity.
Public announcements were going out on what steps people should take to protect themselves.
“It brings challenges to health insurers,” he said, which includes the rise of new diseases, harsh weather conditions.
“It increases the exposure of some risk”
Drought can also hit the agricultural sector, causing some farmers to pull back their health insurance.
“Some people immigrate to other parts of the world that are less affected by climate change.”
A view from the US
Climate change was also top of mind in the United States – and can help to cause migration – increasing the need for international private medical insurance (IPMI).
Like Zimbabwe, the United States – and California in particular – has been hit by extreme weather events.
These climate events could be influencing some people in the US to consider living abroad, thereby increasing demand for IPMI, according to Joe Cronin.
He made his comments as parts of Los Angeles faced massive wildfires, with more than 24 people confirmed dead and another 180,000 people under evacuation orders and neighbourhoods completely destroyed. With more than 12,000 buildings destroyed, damage could exceed US$150bn.
“If you are in Los Angeles right now you’re probably thinking there might be some other place you would like to live.
“Its happening in the US where people are moving from LA to Austin for the tax environment or moving to Colorado for a more moderate climate and an outdoor lifestyle.
“But people are going increasingly outside of the US and its becoming increasingly easy to move to different countries as a lot of countries have made it more attractive for foreigners to come – Portugal being one.”
A view from Canada
Climate change has also been making its presence felt north of the border.
Over in Canada, one aspect of climate change has been an increase in the number of expat miners, according to Tyler Oglivie who is based in Canada.
“Climate change has increased the drive to renewables leading to higher demand for many minerals like copper,” he says.
“This has increased mining activity in copper rich areas like South America leading to more expat miners.”
But another aspect is likely to be an increase in respiratory issues – particularly in Canada.
Ogilvie says: “In Canada one of the main climate change impacts we have seen is an increase in the amount of wildfires.
“While not usually a direct risk – there are indirect risks due to the smoke, especially for folks dealing with respiratory issues. Expats to Canada will certainly be impacted by this.”
But the risk is even bigger than that.
Ogilvie adds: “Ultimately, the bigger risk will be if some areas, especially in the global south, become uninhabitable due to climate change – in this case, mass immigration to the global north will create many challenges, not least of which will be access to medical care – how nations will deal with higher demand on their health care systems will ultimately impact the global PMI space – how remains to be seen.”
And climate change can also trigger higher demand for medical evacuation, as Ogilvie points out.
“As the risk of natural disasters and political instability increase due to climate change PMI plans and consultants will need to focus not only on medical evacuation provisions but on security/natural disaster/political event assistance and evacuation,” he continues.
“Carriers have often put less emphasis on these benefits compared to medical, but they may become more important as time goes on.
“This is also a space where many clients lack internal expertise – so we may see a higher demand for folks with international security/safety expertise to help companies who have global populations.”
A view from Hong Kong
But the effect that climate change has on the health insurance industry could be less direct than is sometimes assumed.
Stephen Ho, chief marketing officer at Pacific Prime based in Hong Kong, said: “While climate change undoubtedly poses significant challenges worldwide, its direct impact on the health insurance industry is less pronounced compared to its effects on property and casualty (P&C) insurance products.
“Climate-related events such as wildfires, hurricanes, and floods primarily affect P&C policies by driving up claims for damaged infrastructure and property.
“For health insurance, the connection is more indirect.
“While emerging health risks, such as the spread of vector-borne diseases and respiratory issues linked to air quality, are concerns, they tend to evolve over time and are often manageable through preventive measures and healthcare advancements.
“In addition, respiratory diseases are on the rise in relation to worsening air quality caused by wildfires and higher pollen levels in certain countries.”
Not everyone feels the effect
But not everyone feels a strong link between climate change and the health insurance industry.
Over in the Middle East, for example Amber Musson Thorp, commercial director for Lifecare International based in Qatar, says: “I’ve been having a think and if I’m honest it doesn’t really have much of an impact to us so far.”
And Kieran Brown managing director of SIP Medical Family, has a similar view.
He says: “As a small business, we haven’t been directly impacted by climate change yet. However, indirectly, we are affected, and there is a greater acceptance and acknowledgment among our team and the general public to reduce our carbon footprint. SIP takes climate change seriously, and we support initiatives to mitigate it at both group and individual levels.”
To minimise its carbon footprint, SIP has digitalised its processes and reduced hard copy postage. It also reduces travel-related emissions via its hybrid work environment.
He says: “Most of our face-to-face meetings are centralised in London or Zurich, so we don’t face the same logistical challenges as larger businesses.
“Comparing our offices in the UK and Switzerland may be unfair due to the different population sizes, but Switzerland seems to have it right, while the UK is struggling.
“Our business operates with a near-zero carbon footprint, except for business travel.”
A view from the wider Asian region
Erik Bleekrode, head of insurance for KPMG China and Asia Pacific, and based in Hong Kong takes a similar view.
“Healthcare and health insurance are a big thing, not just in Hong Kong, but all over this part of the world. That is for a few reasons, but an important one is that national healthcare and national health insurance schemes are often not as advanced as they are in the West.
“The concept of insuring your health is a very common one, and the theme is therefore really, really big and important. The same obviously goes for climate change.”
Who is to blame?
Belekrode notes that China and India are often accused of much of the world’s pollution – but that a lot of it could also be attributed to the Western counties which outsourced much of their manufacturing and production to Asian countries.
That means that when it comes to the Economic, Social and Governmental (ESG) agenda there is a much bigger dilemma between the E and the S.
“As a simple example, you can close all coal mines, but how many million people will be out of a job? And is there actually an alternative in some of the developing economies? Is that the right answer for society as a whole?
“The insurance sector is very exposed to the longer-term effects of climate risk and it is no different in Asia than it is in the Western world by virtue of the investments that they hold in companies that get affected by the impact of client change.”
But if health insurance companies are hit by a higher level of disease caused by climate change, they may be able to recoup their costs by charging higher premiums the next year.
Bleekrode says: “If you have a bad year because all of a sudden there is malaria everywhere or everybody’s gotten sick because of heat stroke, you can reflect that in next year’s pricing and cover your risks better as an insurance company.”
A very nuanced topic
But there is also a question about how big the correlation is between long term climate change and today’s health.
Bleekrode says: “Broadly speaking, when we talk about climate change and risk, we talk about the longer-term effects on businesses, on assets and investments. Health insurance in comparison is a very short-term thing – and probably more susceptible to a global pandemic like we’ve just had with Covid.
“The average temperature going up by a degree in 20 or 30 years time – that’s not necessarily going to make people healthier or unhealthier within the next year.
“So I think in that sense it’s a very nuanced topic.”
But more than that, it can also be very hard to prove that climate change has been the cause of a particular climate event.
“I can see a scenario where you have a very rainy season in Bangladesh and as a result of that, you have more malaria and you have more people that get very sick or die of malaria. But is that just a very rainy year or is it the effect of climate change?”
He said that in Asia people living unhealthy lives and eating unhealthy foods, while living in heavily industrialised cities, has a bigger impact on their health than climate change.
Net zero
But health insurance companies are changing their behaviour when it comes to investing thanks to net zero targets and the risk of climate impact on financial valuations.
Bleekrode notes: “Those net zero targets drive certain investment behavior and they need to find the right balance there as well.
“One of the complexities is that green investments don’t necessarily give a better return.
“But you’ve definitely seen a movement, where, for example, most insurance companies have done away with their direct investment in the coal industry.
“You can broadly say that 90 to 95% of the ecological footprint of an insurance company is their investment portfolio.”
He says: “The biggest influence that insurers can have on reducing the carbon footprint of the world is to either divest from certain companies or play a role to actively influence behaviour of those companies through their voting power.”
