Insurers must prepare for mandatory reporting of insurance-related indirect greenhouse gas emissions and have systems and processes ready, EY Partner Lara Gaede says. 

The Scope 3 reporting standards assess the entire value chain’s emissions impact, and they present an opportunity for insurtechs to help with complex and unfamiliar calculations using algorithms and automation, she told insurtechLIVE in Sydney last week.

“Because this new area is still very immature in Australia, there’s a tonne of opportunity to be innovative and use technology to bring the industry forward,” Ms Gaede later told insuranceNEWS.com.au. 

“My advice for insurance companies ... is to figure out how to get the data they need, or will need in the future, and start planning for that, so when the time comes and it is mandatory, they will have systems and processes and access to the data they need. 

“In Europe they are starting to do this, and it will be an expectation in the future in Australia.” 

For now, guidance on how insurers can calculate emissions is limited, and Ms Gaede says this puts insurance companies and insurtechs in a difficult position. 

One of the main activities to be monitored is insurance for motor vehicles. 

“The insurance company could have a prorated share [of the emissions] because we're using estimation methodology – there is going to be some double counting, this will not be a zero-sum game. The value of an insurance company reporting their Scope 3 emissions is: ‘How can an insurance company help all of those entities that they’re providing insurance to transition to a lower-carbon environment?’ 

“They can do that through how they insure, for what price, and what constraints they put around that underwriting. There’s going to be some big decisions that insurance companies will have to make on what and how they insure.” 

Systems should be flexible and consider future standards, Ms Gaede says. “My biggest message to insurance companies and insurtechs is get started now. It’s a heavier lift than you think it’s going to be.”