Sustainability Preferences of Private Policyholders – Implications for Swiss Insurers

For the study, 1,461 adults residing in Switzerland were interviewed, with a roughly equal proportion of participants being female or male. Responses are approximately evenly distributed across six standardized age categories, from under 25 to over 65.

Each of the respondents selected their primary property/casualty insurer, as well as their 3rd party retirement plan provider. The retirement benefits pillar (if any) was indicated. An active indemnity insurance was a prerequisite for participation in the survey.

The participants were asked about their preference, i.e. the relative importance of a topic or measure, its influence on their next purchase decision, and the perceived commitment of their insurer in this regard. This logic was first applied at the level of the 17 SDGs as a proxy for the overarching term "sustainability", and then to various measures within nine thematic areas. The selection of the topics and the measures to be prioritized were made by a panel of experts consisting of sustainability managers from Swiss non-life and life insurers.

At the level of the overarching sustainability objectives in line with the 2030 Agenda SDGs, a surprising picture emerges from the assessment of insurance companies by their private customers. Around 50% of respondents name "Ending hunger, food security ..." as the most important goal out of the 17 SDGs. The second most popular choice is "A healthy life for all people of all ages." The topic of "climate", which is given much more prominence in the media, only comes in fifth place. When ranked by ESG criteria, social goals are weighted higher in Switzerland, at 57%, than environmental goals, at 31%. Governance issues, such as "strong institutions", receive a high weighting in only 12% of cases, albeit showing that men give these issues a higher weighting than women, who in turn give greater weight to social issues such as gender equality. 

In the next step, participants were presented with seven different specific areas of potential insurance engagement. These seven areas were developed by experts from leading Swiss insurance companies and the Swiss Insurance Association (SIA).

The results show specific measures within these areas that were identified as relevant. However, the individual measures proposed are weighted very differently and, therefore, do not allow a clear focus within the topic areas.

It is possible to identify topics to which insurance companies should pay particular attention from a customer perspective in their operational business (treatment of employees, life cycle assessment) but also in product management (natural disasters, e-mobility) and in the investment area (own investments, retirement provision) to increase their sustainability impact with customers. Within the identified areas, respondents suggest the following hierarchy of importance: Integration of sustainability into core business (integration of ESG criteria into investments, greater emphasis on protection against natural disasters and claims settlement in product offering) is more important to customers than an insurer's own environmental footprint (waste, energy, water consumption).

The aforementioned Swiss characteristic of giving priority to social issues under the term sustainability can be observed both for the operational business of insurance companies (good treatment by the insurance company of its own employees and customers) and in relation to its core business, such as investments and pensions (no investments in companies with links to child labor).

A clearly recognizable positioning on the topic of sustainability and corresponding product offerings, especially in the areas of e-mobility and natural disaster protection, can, therefore, achieve a competitive advantage for about half of the respondents in addition to the insurance premium.

Before we could find out whether private customers in different age groups would be willing to pay more for an insurance product declared as sustainable, we first had to find out about the mood in Swiss society regarding sustainability efforts and the credibility of these efforts on the part of insurers.

When asked to rate their own insurance company's sustainability strategy, only 2% of respondents across all age categories felt their insurance company was very committed. Conversely, only 5% believe that their insurance company makes no commitment at all. However, the results are not very meaningful, as 41% of respondents said they did not know how their own insurance company addresses sustainability.

A closer look at the 25-34 age group reveals that young respondents have a slightly more negative view and are more likely to perceive their insurer’s sustainability engagement as not engaged (7% vs. 5%) or less engaged (15% vs. 12%) than the average. At the same time, their level of knowledge on the topic of the sustainability of their own insurance is slightly higher (41% vs. 38%).

After assessing their commitment, insurers' credibility on sustainability is the second important component. Despite the low level of knowledge, 48% of Swiss respondents rate their insurance company's commitment top sustainability as essentially credible. However, a slight majority of respondents (52% in total) are neutral or say they have little or no confidence.

Overall, Swiss policyholders seem to have an ambivalent relationship of trust toward their own insurance company's commitment to sustainability. At the same time, many policyholders have significant knowledge gaps about that sustainability commitment.

Based on this sentiment, we can now approach the question of policyholders' increased willingness to pay for sustainability features of an insurance product.

When asked about the importance of sustainability aspects of an insurance product for their purchase decision, the following picture emerges across all age groups: For around 50% of respondents, the issue of sustainability is important, but only together with price. As a unique selling proposition, it is important for only just under 16%, while for 34% it is less important or not important at all. These results should be seen as a consequence of the ambivalent perception of the Swiss insurance industry regarding sustainability. Why pay more for the sustainability aspects of an insurance product, when the level of knowledge about and confidence in an insurer’s sustainability goals is limited?

Consequently, the potential for insurers to collect higher premiums by means of a consistent focus on sustainable products and measures is limited. However, the results also show that if the price remains the same, there is an opportunity to gain market share if the company is perceived as being particularly committed. In contrast, there is a risk of losing customers if they are perceived as inactive.

The individual assessment of the importance of sustainability aspects of an insurance product for purchase, differentiated by age group, shows a parabolic curve: The young, as well as older generation, attach more importance sustainability than the middle age groups, which are particularly relevant for insurance, and their willingness to pay a sustainability premium is higher than the average values determined for all age groups.

Overall, private customers find it difficult to see sustainability and insurance as being in a clear interdependent relationship. The current efforts of insurance companies are often not seen, around 40% of respondents cannot assess whether their insurance company is committed to sustainability, and they have little influence on purchasing decisions. Insurance companies also fail to differentiate themselves from each other on the subject, so it cannot be assumed that current consumer decisions on insurance purchasing are significantly driven by sustainability considerations. In particular, the 35-54 age cohort, which is the most important age group for the insurance industry, also shows only a very limited willingness to pay more for sustainable insurance products. However, readiness increases among younger and older consumers respectively.

The results of the survey suggest that the assessment of an insurer on its sustainability correlates more with its general image (customer proximity, fast and fair claims settlement) than with specific sustainability measures or products from this insurer. Combined with the high priority that social issues have in the Swiss population's sustainability assessment, smaller and cooperatively organized insurers will probably be given the benefit of the doubt due to their local roots and social commitment.

The effect of sustainability efforts on customer loyalty, customer acquisition or price premiums is still negligible in private insurance. Nevertheless, it is becoming apparent that the integration of sustainability into the core business of insurance companies is becoming more important for customers. This unlocks opportunities for insurers to use their core competencies in the interests of sustainability: To help customers protect themselves against natural hazards or cope with them better and, in the event of a loss, to rely on sustainable solutions. In addition, ESG criteria must be consistently considered in investments and reported in designated corporate publications. Ultimately, insurance companies must continue to invest in awareness measures, as well as sustainable, but competitive, product alternatives to differentiate themselves among private customers and be perceived as sustainable.