KEY TAKEAWAY:
--There are four key elements to consider when evaluating and predicting how climate change affects life and health insurance: types of insurance product, demographics of insureds, their location and their ability to adapt.
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2023 was a turbulent year for us in the insurance industry in many aspects. Risks continued to manifest worldwide, especially those from the geopolitical, economic and natural catastrophe landscape. On many fronts, this trend is expected to continue in 2024, especially for risks related to climate change.
In the U.S., observers point to effects from extreme heat, drought, flooding and catastrophic wildfires striking throughout the nation, widely and deeply affecting lives and livelihoods.
Life and health insurers have a naturally long-term perspective, and their interests are aligned with those of the people they protect, with a common interest in everyone living a long and healthy life. It is from this viewpoint that they need to understand the relevance of climate change to their insureds’ mortality and morbidity.
Compared with a decade ago, more insurers are taking this subject into account and have new knowledge and tools to help transform gained insights into strategic decisions.
See also: Making Life Settlements More Transparent
Major routes of impact
We have identified the following four relevant consequences of climate change on human health, which are expected to have significant impacts on the life and health insurance industry:
- Extreme temperatures. Unusually high and low temperatures, exacerbated by climate change, disrupt ecosystems and challenge the bodies of humans and livestock. Extreme temperatures, for example, increase the risk of cardiovascular, respiratory and cerebrovascular diseases and worsen chronic conditions such as diabetes and kidney diseases. Whether the expected gains from fewer cold-related deaths will balance the losses from more heat-related fatalities and medical conditions depends on the geographic location under consideration. Adaptation will be the largest variable determining the long-term impact.
- Air pollution. Climate change — along with industrial activity, transportation and traffic — causes air pollution. Wildfires and dust storms expose people to additional loads of particulate matter, exacerbating asthma and chronic obstructive pulmonary disease. Increased pollen exposure driven by climate change also triggers allergic reactions and lung diseases. Likewise, indoor air quality is a major health issue and is influenced, for instance, by heavy rainfall and floods.
- Infectious diseases. Climate change leads to shifts in ecological conditions that, in turn, trigger changes in the spatiotemporal (location and time) distribution of pathogens, parasites and diseases. Many of those are vector-borne, that is, carried by intermediate hosts such as ticks or mosquitos. Among the transmitted diseases are Lyme disease, malaria, Zika virus fever and dengue fever, which all surged in recent years. The story is complicated, as overall warming is only one influence among many. Others include rainfall patterns, urbanization and human mobility, as well as increased interactions between humans and wildlife.
- Mental health. Climate change not only affects human bodies but also affects our minds. Coping with the consequences of changes in our environment takes its toll: Studies have shown that hotter temperatures are associated with mood disorders, substance use disorders, anxiety stress disorders, schizophrenia and self-harm. Living through a natural catastrophe or extreme weather event can cause post-traumatic stress disorder. In addition, poor mental health can harm the immune system. Although the magnitude of the impact of climate change-related mental health conditions is yet to be determined, it could become a major concern for both mortality and morbidity if not properly addressed.
See also: How Millennials Revolutionized Life Insurance
Relevance of climate change for life and health insurance
The impact of climate change on people’s lives is highly complex and depends heavily on certain factors. The following are four key elements to consider when evaluating and predicting how climate change affects life and health insurance:
- Types of insurance products. The degree to which climate change affects insurers’ life and health insurance business depends on their product portfolio and associated risks. Health insurance, which carries morbidity risk, for example, may be exposed to more direct and short-term impacts compared with life insurance. But life insurance, particularly permanent life, could face long-term and possibly larger mortality risks. Annuity, critical illness or long-term care products also have their own types of risk exposure.
- Demographics of insureds. Demographic and sociodemographic elements, including age, occupation, income and education, heavily influence people’s vulnerability and resilience to climate change risks. Studies find that those in lower socioeconomic groups, as well as children and older people, tend to be overexposed to the impacts of climate change. Regarding the insured population, medical underwriting, during which some applicants have to be turned down due to preexisting health conditions, acts as a filter that leads to an insured sub-population with better average health compared with the general population.
- Geographical consideration. Insureds’ geographical factors naturally influence their climate risk exposure, such as extreme temperatures, humidity, air quality, catastrophic events and ecological conditions. The fatality rate caused by many diseases is also influenced by the quality and availability of access to local healthcare, which is linked to people’s places of residence.
- Adaptation. The long-term trajectory of response to climate change’s impacts on biometric factors is highly dependent on the speed, size and quality of adaptation. It has been shown, for instance, that the death toll of heat waves is not driven by absolute temperatures but by relative increases against what people are used to. Even small changes in behavior, such as checking for ticks after a walk or draining stagnant water pools, and preventive measures such as ensuring hydration and rest during peak exposures, can move the needle a lot when implemented broadly and consistently.
Outlook
Insurers can gain significant benefits from understanding climate change and its most relevant aspects and from partnering with stakeholders, including the medical community, researchers, reinsurers and climate experts. The aim is to better understand the impact of climate change on the mortality and morbidity of the insured population and, ultimately, on the insurers’ business. The common goal will always be to support individuals in living long and healthy lives, now and in the future
For more in-depth information, see the multi-part article, “The relevance of climate change for life insurance,” published by SCOR.
