Insurance Companies’ IT Strategies Will Be Influenced By Understanding of Climate Change’s Effects

Financial institutions such as Allianz and HSBC are taking the lead in adopting business strategies that address climate change. This will affect the technology investment decisions made by insurance IT organizations.

A perfect storm (to use an apt metaphor) of circumstances has come together to make climate change, green computing and environmental protection prominent topics in the financial services industry. Thanks to a combination of public awareness, globalization, Al Gore and corporate self-interest, "going green" no longer is a fringe affair, and a growing number of insurance companies are very publicly making environmental responsibility part of their business agendas.

For example, last fall Allianz Group and the conservation organization WWF (World Wildlife Fund) issued a study called "Climate Change and Insurance: An Agenda for Action in the United States." The report examines recent scientific findings about climate change, specifically its consequences for forest fires, storms and floods, and the potential impact on the insurance industry and its customers.

More recently, global banking organization HSBC announced in May the creation of a five-year, $100 million program to combat climate change worldwide. According to HSBC Group Chairman Stephen Green, "Over the next five years HSBC will make responding to climate change central to our business operations."

Goals related to reducing carbon emissions and adopting sustainable use of resources could involve everything from underwriting and risk management policies to product development and data center design. When you take into account initiatives that technology companies such as Sun Microsystems and HP have launched to make their hardware more environmentally friendly, it becomes clear that making the business case for a technology investment will have to include the solution's impact on the environment as well as its ability to calculate risks or integrate with legacy systems.

At the same time, while an increasing number of insurers and other financial institutions are concluding that environmental sensitivity and growth don't have to be mutually exclusive, they are going to have to be careful to avoid any perceptions of "Do what we say, not what we do." A recent article in BusinessWeek reported that many global banks actually have increased greenhouse gas emissions -- mainly due to increased business travel and reliance on technology that requires electricity.

As with any other business/technology-related challenge, no one should expect any easy answers or solutions to the "insurers and climate change" issue. But there does need to be recognition that with leadership comes scrutiny -- and accountability.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio