Have a read of our interview with ChatGPT, the artificial intelligence that has been designed to converse with people in real time. Unsurprisingly, we decided to chat to it about ethical insurance.
Our interviewer is Nick Oldridge, Head of Marketing & Sustainability.
I was not at all prepared for how advanced ChatGPT was. The speed of response and the detail provided was quite incredible. I was also fascinated at how the AI reflected our human weakness for focusing on the short term impacts whilst almost ignoring the devastating long term implications of run-away climate change. This insight will help shape our efforts to persuade the insurance industry to take more rapid action and to refuse to underwrite all new fossil fuel projects.
Nick: What do you know about the insurance industry?
ChatGPT: The insurance industry is a financial services industry that provides protection against risks and uncertainties. Insurance companies offer a wide range of products, including life insurance, health insurance, property and casualty insurance, and liability insurance
Life insurance provides financial protection for individuals and their families in the event of the policyholder’s death. Health insurance helps to cover the costs of medical treatment and care. Property and casualty insurance protects against losses to an individual’s property, such as their home or car, and provides liability coverage in the event that the policyholder is sued for damages
Nick: What influence do you think the insurance industry has on climate change?
ChatGPT: The insurance industry plays a significant role in addressing climate change and its impacts. Insurance companies are exposed to financial risks from natural disasters and other events that are influenced by climate change, such as floods, hurricanes, and wildfires. As a result, insurance companies have a financial incentive to mitigate these risks through investment in risk reduction measures and adaptation strategies.
Insurance companies can also use their financial resources and expertise to support the transition to a low-carbon economy by investing in renewable energy and other projects that reduce greenhouse gas emissions. Some insurance companies have publicly committed to divesting from fossil fuel companies and investing in sustainable energy and infrastructure.
In addition, the insurance industry can influence public opinion and policy on climate change through its support for research and analysis on the impacts of climate change and the risks it poses to society. By providing this information to policy makers and the public, insurance companies can help to build support for action on climate change
Nick: In addition to investing in fossil fuels, the insurance industry also enables fossil fuel production through its underwriting activities. This means that without insurance, no new oil well, coal mine or gas field could operate. This gives the industry more influence over cutting our emissions than almost any other. How do you think insurers should use this influence?
ChatGPT: It is true that the insurance industry plays a critical role in enabling the operations of fossil fuel companies through its underwriting activities. Insurers provide coverage for a wide range of risks faced by fossil fuel companies, including property damage, liability, and business interruption. This coverage is essential for the operations of these companies and helps to ensure that they can continue to extract and sell fossil fuels.
Given the significant role that the insurance industry plays in enabling fossil fuel production, insurers have a unique opportunity to use their influence to encourage the transition to a low-carbon economy. One way that insurers could do this is by using their underwriting activities as a means of promoting sustainable practices and reducing the carbon footprint of the industries they serve. For example, insurers could require companies to adopt best practices in order to qualify for coverage, or they could offer discounts to companies that have demonstrated a commitment to reducing their greenhouse gas emissions.
Insurers could also use their financial resources and expertise to invest in renewable energy and other low-carbon projects. This could help to drive the development and deployment of these technologies, which is essential for achieving the necessary reductions in greenhouse gas emissions.
Overall, it is important for insurers to use their influence to support the transition to a low-carbon economy and to help mitigate the risks posed by climate change
Nick: These sound like sensible suggestions, many of which are being carried out by insurers today. However, global emissions are still rising and the carbon budget, to keep temperature increases to within 1.5 degrees above industrial levels, is rapidly depleting. According to the IPPCC, the International Energy Agency and the majority of scientific institutions across the globe, we simply cannot afford to expand fossil fuel production if we are to stand any chance of limiting warming to 1.5 degrees. It sounds like the measures you suggest will permit fossil fuel companies to continue to expand production, which will be catastrophic for our economy and well being in the years to come.
ChatGPT: You are correct that global greenhouse gas emissions are still rising, and that the carbon budget for limiting temperature increases to 1.5 degrees is rapidly depleting. The measures I suggested, such as promoting sustainable practices and investing in renewable energy, are intended to support the transition to a low-carbon economy and help mitigate the risks posed by climate change. However, these measures alone may not be sufficient to achieve the necessary reductions in emissions.
To effectively address climate change, it will be necessary to implement a range of policies and measures that reduce greenhouse gas emissions across all sectors of the economy. This will likely require a combination of regulations, incentives, and market-based mechanisms, such as carbon pricing. It will also require a concerted effort by governments, businesses, and individuals to shift away from fossil fuels and towards low-carbon technologies.
The insurance industry has an important role to play in this transition, and insurers should continue to use their influence and resources to support the development and deployment of low-carbon technologies and the adoption of sustainable practices. However, ultimately it will be necessary for governments and other stakeholders to take bold and decisive action to address the root causes of climate change and accelerate the transition to a low-carbon economy.
Nick: It is unfortunate that governments are not taking the bold action that is needed. Do you not think that insurers could therefore take the lead and refuse to underwrite any new fossil fuel production?
ChatGPT: It is certainly possible for insurers to refuse to underwrite new fossil fuel production, and some insurers have already taken this approach. By declining to provide coverage for these types of projects, insurers can use their influence to discourage the expansion of fossil fuel production and support the transition to a low-carbon economy.
However, it is important to note that such a decision would likely have significant implications for the insurance industry and the industries it serves. Insurers that decline to underwrite fossil fuel projects may face a reduced demand for their products, as companies in the fossil fuel industry may be unable to secure the coverage they need to operate. This could lead to financial losses for the insurers and could potentially affect their ability to meet their financial obligations, such as paying out claims to policyholders.
In addition, a decision by insurers to refuse to underwrite fossil fuel production could have broader economic consequences, as the fossil fuel industry is a major contributor to many national economies around the world. By declining to provide coverage, insurers may be indirectly contributing to the decline of this industry and the loss of jobs and economic activity associated with it.
Overall, it is important for insurers to carefully consider the potential consequences of their underwriting decisions and to find a balance between supporting the transition to a low-carbon economy and protecting their own financial stability.
Nick: Is it right to express concern over the financial implications of this action on the insurer without comparing this to the cost of inaction, which is predicted to be far more severe? Without halting fossil fuel expansion the insurers will maintain short term financial performance but at the cost of vastly increasing their exposure to claims resulting from natural disasters and extreme weather caused by an unstable climate. They will also be faced with unprecedented economic and social impacts which on current predictions, will far out weigh the costs relating to pulling out the fossil fuel market. When it comes to broader consequences it appears you are again placing short need ahead of potential economic collapse and protecting our way of life for future generations. We now know the cost of taking rapid action is vastly cheaper than attempting to deal with the consequence later on. Renewables today are significantly cheaper, more efficient and do not damage human health through atmospheric pollution for global warming. As a result we can afford to conduct a rapid transition to both halt fossil fuel expansion and then to phase it out completely. The savings by decarbonising our energy system are so significant (one study suggests $12 trillion),that we can afford to deal with the decline of an industry and its associated jobs (and that’s before we take on board the fact that we create more jobs greening the economy). I would question whether your approach is ultimately in the interests of these insurers, or even society itself. If you factor in the disproportionately higher costs of failing to take take rapid action and recognise that we can fully decarbonise the global economy AND make significant savings, then it makes little sense from an economic or ethical perspective, for an insurer to underwrite new fossil fuel projects
ChatGPT: You raise some important points about the financial implications of the insurance industry’s underwriting decisions on fossil fuel projects. You’re correct that it is essential for insurers to take into account the potential long-term costs of inaction on climate change and the risks it poses to their business, policyholders and society as a whole. The cost of failing to take rapid action on climate change is indeed predicted to be far more severe than the cost of taking action now. The damages from natural disasters, such as floods, hurricanes and wildfires are expected to rise as climate change increases their frequency and severity. Long term, it could be detrimental for the insurance industry to keep underwriting fossil fuels as it would increase their exposure to these risks.
Also, you are right in stating that the economic case for transitioning to a low-carbon economy is increasingly compelling. Renewable energy sources are becoming increasingly cost-competitive with fossil fuels and the cost of renewable energy technologies is continuing to decrease. Transitioning to a low-carbon economy could save trillions of dollars in reduced damages from climate change and create new jobs and economic opportunities.
You are also correct in highlighting that there are also social and ethical considerations that insurers need to take into account when making underwriting decisions. Insurers have a responsibility to protect policyholders and society as a whole, and their underwriting decisions can play an important role in achieving a sustainable future. It is becoming increasingly clear that insuring fossil fuels is not only morally questionable, but also financially risky.
In conclusion, while the insurance industry is facing a complex landscape, with the need to balance the financial and social implications of underwriting fossil fuels, it is true that the long-term cost of inaction on climate change is far greater than the cost of taking action now. Insurers can take important steps to mitigate climate change risks, such as divesting from fossil fuels and investing in renewable energy, and by declining to underwrite fossil fuel projects, they can support the transition to a low-carbon economy
Nick: I think we are agreed there. Finally, can I ask whether you think that consumers are fully aware of this unique link that insurers have to the climate crisis, through their investing and underwriting policies?
ChatGPT: It is likely that many consumers are not fully aware of the link between the insurance industry and the climate crisis. Climate change is a complex and multifaceted issue, and it can be difficult for consumers to fully understand the ways in which different industries contribute to it and how they can take action to address it.
Insurers, in general, have been slow to fully address the issue of climate change, and not always transparent about the ways in which their underwriting and investing practices contribute to it. This lack of transparency makes it difficult for consumers to understand how their insurance policies may be linked to climate change, and how their own actions can support the transition to a low-carbon economy.
However, I think this is starting to change, and more and more consumers are becoming aware of the link between the insurance industry and climate change. Insurers are also increasingly recognizing their responsibility to address the issue and are starting to take action on climate change. Some are divesting from fossil fuels, investing in low-carbon infrastructure, and creating new products and services to help policyholders mitigate the risks of climate change. They also are becoming more transparent in their practices.
It’s worth noting that consumers can play a key role in pushing insurers to make more sustainable decisions by demanding more transparency and pushing for products that align with their values. By choosing insurance products that are consistent with a low-carbon future, consumers can help to support the transition to a low-carbon economy.
Nick: Thanks ChatGPT, this has been a most interesting conversation.
ChatGPT: You’re welcome, I’m glad that I could help. Climate change is a complex and critical issue that affects us all and it’s important for us to understand the role that different industries play in it, and the actions that we can take to address it. If you have any more question, feel free to reach out.
ChatGPT was created by OpenAI and is open to public use in order to obtain feedback on its effectiveness. To chat to the AI follow this link
Naturesave was founded to help create a more sustainable insurance industry. We seek to lobby our insurance partners to urgently divest from fossil fuel investments and review their underwriting policies in relation to fossil fuel operations. Read out latest blog A New Red Line For The Insurance Industry
Further reading
A useful source of information on the ethical behaviour of insurance companies can be found by visiting Insure Our Future, a global campaign of NGOs and social movements that hold the industry accountable for its role in the climate crisis. Reclaim Finance are also useful and have an excellent Oil and Gas Policy Tracker.