The Hindu Business Line : Climate changes could impact business practices

THE Hollywood flick The day after tomorrow, set against the backdrop canvas of global warming, playing at a nearby theatre, could be a racy entertainer with special effects. But in real life too, climatic change is no more a marginal issue and is in fact changing the way companies are to do business in future.

"Insurance is in the frontline of climate change," says Mr John Parker, Association of British Insurers (ABI).

A recent study commissioned by the ABI has used Europe-centric examples to illustrate the "changing climate for insurance". But the study released this month provides a repertoire of green lessons, which countries on a growth path like India, could do well to leaf through.

"Few businesses sectors have attempted to analyse the impact of climate change on their industry and customers," says ABI.

Widespread floods in Europe in 2000, indicate that insurance companies will have to deal with the consequences of such natural disasters. Insurers must be equipped to analyse the new risks that flow from climate change, it states.

"Much of the industry's work over the next few years will concentrate on the implications of climate change for home owners and businesses. Erratic and extreme weather conditions will require changes in underwriting practices and claims handling by property insurers," says Mr Parker, ABI's Head of General Insurance. The author of the ABI study, Dr Andrew Dlugolecki is a veteran on climate change and insurance. He points out that climate change would impact the insurance segment, in terms of changes in consumer needs and patterns of claims, thus requiring tightening of regulation.

"Weather risks are already increasing by two to four per cent per year on household and property accounts due to changing weather. Claims for storm and flood damages in the UK have doubled to over six billion pounds over 1998-2003, compared to the previous five years, with the prospect of further tripling by 2050," he states.

Further, Mr Parker says that the indirect impact of climate change on health and longevity could potentially influence the balance between State and private health care and pension products.

The heat wave in Europe in 2003, where temperatures were six degrees hotter than the 20th century average, led to many hospital admissions and the death of 27,000 people. The potential impact on the health insurance industry was bigger than ever expected, the study says.

Challenges for the future include greater heat stress and summer mortality, increased incidence of skin cancer due to an outdoor lifestyle and greater incidence of food poisoning due to warmer climates.

More Stories on : Climate & Weather | General Insurance

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