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SUSTAINABILITY| 18.01.2023

How can an insurance company help build a better society?

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Companies have an enormous capacity to change the world, and they can help make it a more sustainable place, or in other words, more just, more equitable, and more prosperous. This realization has become increasingly common among companies, as well as in society itself, and this has led to a growing awareness of environmental, social, and governance (ESG) issues in the private sector. It has also given companies a sense of meaning that goes beyond their business activities, as they recognize their power to generate social progress.

However, when looking for examples of companies that demonstrate these commitments, it is still most common to find a focus on environmental protection, even though the biggest challenge facing most companies is the need to address their impact on society.

Mónica ZuletaAs explained by Mónica Zuleta, MAPFRE’s Group Head of Sustainability, regarding the group’s vision on how to implement ESG criteria and sustainability with an accent on the social, “all aspects of ESG are important, but for us, as a company that takes care of people, the S for Social carries the most weight, and we have programs in place to improve social inclusion, ensure fair employment practices, and foster financial knowledge. There can be no doubt that we are at a point in history when major steps have been taken towards creating a more diverse and inclusive society, but there are still significant gaps in equality, and these have a direct impact on personal well-being. In view of this, we are continuing our work on advancing towards a better model of society, one that ensures equal opportunity for everyone, with no exceptions”.

To help achieve this goal, MAPFRE’s current strategic plan includes not only business objectives, but objectives of a social nature as well:

  • Ensuring that people with disabilities represent at least 3.5% of its workforce
  • Achieving salary equality by reducing the gender pay gap to +/-1%
  • Having 90% of its investment portfolio rated using ESG criteria
  • Using ESG criteria to approve 100% of its preferred network for motors, home, and health insurance and the collaborating providers

Investment and underwriting can be effective tools

Because of its central position in the economy and contacts with companies in many other industries, MAPFRE can play a fundamental role in terms of achieving social goals. “As insurance companies and investors, we have influence over resources and can help channel their flow towards a more just economy. Through our investment and underwriting practices, we can drive progress for the social objectives we are proposing, such as equal opportunity, gender equality, and respect for human rights”, Ms. Zuleta emphasizes.  

For example, this translates into directing investments towards companies that are moving forward and setting themselves apart by including social development as part of their daily operations. This is something that MAPFRE AM demonstrated when it launched the first European fund for inclusion of persons with disabilities (cited in the UN’s Global Compact report as an example of good practices). Another example is MAPFRE’s decision not to insure companies that fail to show respect for human rights, or in relation to the environment, its decision not to insure construction of new coal-burning power plants or operation of new coal mines, and not to invest in companies with their revenue based on coal.  

How insurance contributes to a more sustainable society 

The question of how insurance companies can help improve society is the focus of a report published by the Geneva Association (GA), a global insurance industry group, entitled The Role of Insurance in Promoting Social Sustainability. One main point that report makes is that insurance activities in themselves contribute to making societies more sustainable, by providing socio-economic resilience. According to the GA, insurance: 

  • Brings financial stability and peace of mind. It does this by letting individuals, families, and companies make plans for the future knowing that somebody has their back.  
  • Stabilizes and complements governmental social security programs. Lines such as life insurance, accident insurance, and pension plans can all play a part in this. 
  • Facilitates trade. A very high percentage of commercial transactions (and in general any business-related projects such as for construction, manufacturing, etc.) are supported by some type of insurance. In fact, many projects could never move forward if the investments made by the project’s promoters could be put at risk by any unexpected event.  
  • Puts savings to work. From the time when the insurance company receives a premium payment until the time when those funds are used to pay a claim, the money is dedicated to purposes such as investing in sovereign bonds.  
  • Allows more effective risk management and improves mitigation of losses. 

However, despite these positive effects produced by their ordinary activities, insurance companies still need to go further. In its report, the Geneva Association emphasizes one area where there is still room for improvement, and it is one shared with many other industries: a lack of metrics to assess social impact. This is why it has proposed taking the three scopes of the Greenhouse Gas Protocol as a starting point, then adapting these to the social aspects of ESG. This framework for analyzing social impact is divided into three levels: 

  1. Employees. One of the most powerful ways to reduce inequality is by generating quality jobs. It is hard for a company to claim that it is socially sustainable if it does not even provide good conditions for its own workers, because they are the first people any company should be looking out for. In relation to this point, MAPFRE now has permanent contracts for 97% of its workforce.  
  2. Communities. The next level a company needs to address is related to the communities where it has a presence, and how it is contributing to their development. All of these communities will include a diverse range of stakeholders, who often have differing needs. MAPFRE in particular operates in about 30 countries, all with very uneven income levels, so its social action plans also have to be flexible. 
  3. Impact across the value chain. This is where an insurance company undoubtedly has its most significant impact. This is an aspect that includes not only its own business (insurance and investment), but also the positions upstream (service providers and partners) and downstream (consumers) on its value chain. A responsible company needs to implement ESG criteria and avoid potentially negative impacts for all of those positions (in other words, it must avoid collaborating with any projects that could have a negative impact on individual rights or social objectives).  

Social advancement is a collaborative challenge. Nevertheless, there are many things that a company like MAPFRE can do on its own to make progress in this area. Ms. Zuleta concludes by pointing out that “the insurance industry needs to continue its work on promoting all aspects of inclusion, by improving financial education, facilitating access to insurance, and making sure that sustainability exists throughout the entire value chain. As underwriters of risk, and as institutional investors, insurance companies have a major influence that can be applied to advancing the cause of social sustainability. If we are unable to build a society where everyone can develop and achieve their true purpose, then the communities where we operate will continue to be at risk.”  

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