Author: Michael Guo, Special Assistant to the Chairman, Ping An Property & Casualty Insurance Company of China
December 8, 2021
As the climate change emergency accelerates, the global insurance industry faces unheard of challenges: from heavy rain in China’s Henan province to dramatic flooding in Germany and wild fires in northern California, much of our shared environment is at risk. Catastrophe insurance though is still seen as ‘optional’ for too many. Yet insuring for climate change risk – be it from extreme heat, rain or hurricanes – is a key part of the environmental, social and governance contract, or ESG commitment, for increasing numbers of businesses.
Rising to the challenge, Ping An Property & Casualty has overhauled and upgraded its green financial services portfolio, developing car insurance products for electric vehicle (EV) owners plus a brand new range of products that support the green energy industry with an emphasis on photo-voltaic, hydro and wind power.
“In the future we will introduce preferential policies and discount rates for green enterprises and projects to promote better economic and environmental development,” Michael Guo tells World Finance. This commitment to the environment – including discounted policies and incentives to eco-friendly companies and projects – is a radical departure for an industry still, for the most part, struggling to make sense of the long-term risk factors of an over-heating planet.
ESG principles at the heart of business
In other words, this Shenzhen-based property insurance company is putting green finance at the heart of its business – from operations to procurement, right down the supply chain – while financially incentivising other companies to change their behaviour for the benefit of all. “Through our digital transformation,” Guo says, “we continue to create a paperless work environment, settling claims online while many of our insurance policies are designed to encourage our clients to put their energy and carbon emission commitments first.”
Insurance companies have a responsibility not just to serve the real economy and stimulate overall economic growth, but to protect the environment
To bolster its ESG expertise and reach, Ping An Property & Casualty has built up a large team of experts with close, hard-won knowledge of natural disasters. In the background, so many businesses remain completely unprepared for the long-term effects of climate change. “In August this year,” Guo explains, “we built our first natural disaster laboratory in Sichuan, able to simulate 10 natural disasters, from storms to typhoons and earthquakes, all based on existing records of disaster and other socio-economic statistics.”
“Our experience,” Guo continues, “in assessing catastrophe risk not only helps risk industry quantification and actuarial pricing but, we feel, society more broadly.” Green and sustainable ways must always be advocated “to support green economic development,” he says, adding that “to achieve carbon neutrality has become a must-do for any insurer with focus on ESG.”
Online emergency response 24/7
Insurance companies have a responsibility not just to serve the real economy and stimulate overall economic growth, but to protect the environment. So how is environmental risk handled on the ground? If the carefully developed Ping An Property & Casualty system predicts heavy rain or flood risk, text messages to clients – from car and home owners to corporate and business customers – are sent, advising them of prevention measures to cut their risk exposure.
Ping An Property & Casualty also deploys these messages via Ping An Auto Owner app, the largest automotive service app in China, encouraging policy holders to move vehicles to a safer place. Backed by robust human emergency resources and a carefully honed disaster risk management platform, Ping An Property & Casualty schedules and organises rescue teams and vehicles to follow up all extreme incidents when catastrophe strikes.
In addition, the company has constructed a full-cycle risk management system for catastrophes with defined emergency processes to minimise and prevent further client losses. “When a disaster happens, our survey and claim team will respond, start rescue work, and stop losses,” says Guo. “After a disaster, our insurers will quickly take up their compensation responsibilities. We always ensure timely availability of claim funds through our rapid settlement and pre-claims systems so businesses can restart and get on with their post-disaster reconstruction, if needed.” Ping An Property & Casualty also works closely with government agencies to clarify liability exposure, alleviating dispute and civil conflict potential in post-disaster loss situations. This is especially important for businesses so that they can get back on their feet as quickly as possible.
Electric vehicle cover risk
Ping An Property & Casualty is optimistic about the development of electric vehicle (EV) insurance for EV owners as the global economy transitions to cleaner transport technology. However, the EV cover risk area remains technically immature. This sector hasn’t – yet – had time to develop reliable oversight of all risk and claim scenarios, despite there being around 350 million private cars in China.
“To better serve new energy car owners,” says Guo, “it is necessary to develop new terms and provisions and we’ve accumulated the historical underwriting and claims data of EVs compared with internal combustion engine vehicles so we can do this thoroughly.”
“We’re also,” he adds, “actively working with car makers and auto industry partners to carry out research on the specific risks of batteries, motors, and electronic control of new energy vehicles.”
While electric vehicle technology provides cleaner transport it adds technically ambitious autonomous driving tech possibilities, enhancing driver, passenger and pedestrian safety. While much of the legislation around it is in development, Ping An Property & Casualty says the long-term benefits will support customers – both in value and with the added on-the-road protection.
Accurate risk assessment and ‘big data’ at a granular level is also increasingly relevant, which can fundamentally change any insurer’s sense of vehicle risk. Collision avoidance systems, for example, are highly sophisticated. But data around these safety advances must be equally available across the risk industry for the sustainability of safety systems long-term. Guo believes cross-industry discussion and collaboration is vital and is committed to working with other industry players to support automated driving technology for the benefit of all. This may include, inevitably, some rationalisation of different automated technologies, which can be potentially confusing to customers, both in and outside the risk industry.
COVID-19 support for the most vulnerable
In July 2021, Ping An Property & Casualty, Shenzhen, collaborated with Bank of China to issue the first batch of digital RMB policies. Specifically it developed a pilot insurance programme for hospital workers in Shenzhen’s Nanshan District. This included RMB 300,000 ($46,850) compensation for death caused by COVID-19, a RMB 50,000 ($7,800) allowance for nurses diagnosed with COVID-19 and RMB 50,000 ($7,800) compensation for accidental death. Policyholders could also have preferential insurance rates if they used digital RMB wallets for payments. The introduction of these policies mark an extension of Ping An Property & Casualty’s digital RMB pilot programme for online settlement scenarios, boosting settlement convenience, speed and security for their clients.
From green engineering to superfoods
While the car industry is one industry undergoing seismic change, new ways of insuring risk abound – from agriculture to healthcare and heavy industry. The bottom line is innovation and carbon neutrality.
Innovation is nothing new for Ping An Property & Casualty, underwriting the extraordinary Three Gorges Dam ship lock mega project – an elevator capable of lifting cargo ships or cruise liners more than 100 metres – allowing vessels to cross the Three Gorges Dam.
Ping An Property & Casualty has since provided protection for increasing numbers of offshore and onshore wind farms as well as photovoltaic projects to help their clients diversify their long-term energy dependency. Extending its environmental governance, Ping An Property & Casualty has launched its first environmental liability policy and introduced ecological impairment liability cover. Gradual pollution and grassland cover is another area in which Ping An Property and Casualty is providing innovation.
Traceability for the food industry is also a major breakthrough: Ping An Property & Casualty has designed supply chain production insurance deploying blockchain technology. This tech monitors, for example, the production growth stages of goji berries – widely seen as a ‘superfood’ across Asia as well as the West – with real-time digital journals recording the harvesting process, end-to-end. “Every farm product has a unique traceability tag which shows its origin, processing, transportation, and cash value for farmers. The aim is to help improve agricultural production standards and create more eco-friendly and high-quality brands of farm products,” says Guo.
Planet protection underpinned
Behind all these efforts and innovations is a single-minded determination to make investment standards greener. “Environmental protection and green industry standards are the two core factors to consider when the company makes its investment plans,” says Guo. Ping An Property & Casualty has drafted evaluation standards for all green projects, underpinned by national guidelines. Based on strict environmental criteria for green companies, it also invests in publicly listed clean energy stocks, bonds and debt vehicles.
This is backed by a bespoke green finance office responsible for sustainability-related projects across insurance, services and investment. “Green Finance is more than just a concept but a viable approach to eco-friendly business growth,” Guo continues. The Shenzhen-based property insurance company’s advanced early warning laboratory system points to more wildfires, tornadoes and droughts, which will continue breaching the living conditions and livelihoods of many, despite the Chinese government’s commitment to achieve carbon neutrality by 2060. The point, says Guo, is to be prepared – and to innovate regardless.