In Ireland, AIG recently cancelled the policies of numerous young drivers who persistently exceeded the speed limit.  In New York, property and casualty insurer Lemonade has announced changes to their policies following the tragic Las Vegas massacre.  And in Sweden, Skandia has developed an underwriting model to reduce long-term sick leave for corporates.

What do these three unrelated events have in common?

In each case, insurers are making decisions to help prevent risk, rather than simply insuring against it.

Historically, the insurance industry has helped eliminate certain risks.  For example, insurers had a constructive role in founding the first fire departments, building codes and vehicle safety testing.  And it was fire insurance companies which demanded the implementation of safe practices and the installation of hydrants.

Today, insurance continues to shape our lives.  For example, insurers now reward individuals for being more active and maintaining a healthier lifestyle.  And the insurance industry has a key role in lobbying governments for policy development on climate change.

The situations below illustrate in more detail how insurers can have an impact beyond their bottom line.

How AIG is trying to save lives

Using data gathered via telematics, AIG Ireland recently cancelled over 200 young drivers’ policies for persistent excessive speeding. (Telematics involves attaching a device to a car to monitor its location, movements and behaviour).

One driver had their cover cancelled after being detected driving at 193 km/hr on a motorway, and 197km/hr on a secondary road.  In Australia, the Insurance Contracts Act arguably poses additional procedural challenges for insurers wishing to cancel a current insurance policy.  However, Australian carriers are likely to follow the overseas lead.

AIG is now offering discounts to drivers who agree to have telematics devices installed in their cars.  Importantly, the insurer is also calling for legislation to make it compulsory for drivers under 25 to carry these tracking devices, believing that many lives will be saved by making telematics mandatory.

Lemonade’s stance on firearms

Meanwhile, insurance start-up Lemonade has announced changes to their policy following the devastating Las Vegas shooting.  For example, Lemonade will be adding more protection around firearms, such as excluding cover for assault rifles.  The insurer will also add requirements that firearms be stored securely and used responsibly, and cover will be voided if these requirements are breached.

As Lemonade have blogged: “As an insurance company, it falls to us to shield our customers from damage to their guns, and by their gun.  And so, we’ll continue crafting our policies for the vigilant gun owner, not the vigilante gun owner.  The former are welcome, and will find our policies cover them fully; the latter aren’t and won’t.”

How Skandia helped reduce sick leave claims

In 2002, Nordic insurer Skandia had an unprecedented number of claims for long term sick leave insurance for corporate clients. So they began supporting research into how the healthiest corporates work.  Skandia ended up developing a differentiated underwriting model for corporate health insurance, based on a diagnostic tool with questions for employees, and a rehab services network and hotline to prevent sick leave.  By 2014, Skandia’s clients had 2% of their workforce on sick leave, compared to the national average of 7%.

The way ahead

The reality is that the insurance industry suffers the financial consequences of unsustainable practices, such as car crashes due to speeding, or gun violence, or increased sick leave claims. And yet, by developing new products and changing underwriting guidelines, insurers can alter their balance sheets and have a lasting positive social impact.

With the current emphasis on ESG principles, sustainability and social responsibility, expect to see more insurers helping to prevent risk, rather than just insuring it.