When we think about insurance, we think about covering our financial losses when a disaster or accident occurs. We are willing to pay a premium to protect us.
However, over the years insurance hasn’t just protected us financially; it’s protected us physically—not only playing a critical role in covering our losses, but also reducing our underlying risks and helping solve big societal challenges.
How big fires led to safer cities
Take urban fire for example. During the turn of the 20th Century, fire was a widely recognized risk in city life. In fact, some of the world’s most iconic cities were consumed by fire: Chicago in 1871, Boston in 1872, San Francisco in 1906 and Tokyo in 1923.
During this time, insurance companies were finding themselves too often on the losing end of the deal. As a result, the industry began to demand cities upgrade their infrastructure—more fire alarms, fire escapes and fire hydrants, and new building codes—in order to qualify for coverage. Early fire stations were even owned by the insurance companies themselves.
It was in the insurance company’s and the city’s best interest to focus on steps to reduce underlying fire risk to people and property.
The result? Safer cities, innovative infrastructure and fewer expensive catastrophes.
Another example is automobile safety. We know that simply wearing your seatbelt can reduce the chance of death in a car accident by more than 50 percent. And from the 1970s—when seat belts became standard in U.S.-manufactured cars but usage was low—to today, insurance companies have played a role in advancing their use.
GEICO, for example, asks consumers to “buckle up and drive down your rate.” Their offer: “If you and your passengers always wear seat belts, you could receive a discount of up to 15% off the medical payments or personal injury protection portion of your premium.”
By incenting smart consumer behavior, the insurance industry has helped reduce premium and payout costs and lower the risk of fatal accidents.
Taking on this century’s mega risk
Today, one of the most significant challenges testing society is climate change. Climate impacts are posing new and unprecedented risks on a global scale. Much like the urban fires of the 19th and 20th century, devastating storms, floods, droughts and rising seas are impacting communities that have never seen this kind of weather intensity and destruction before—and many are not prepared.
The insurance industry can play a key role today in helping to minimize this devastation and help society innovate new solutions to reduce climate risks and make people safer.
The positive impacts could be enormous.
And one powerful part of the solution now gaining increasing attention is the role healthy natural systems play in reducing our climate and disaster risks.
This area presents a huge opportunity to not only protect people and reduce costs, but also save and restore nature.