IAG and Climate Change

A majority of scientific opinion now supports what many have long suspected: weather patterns are changing and temperatures are rising. The evidence is everywhere, and carries profound and far-reaching implications for the insurance industry and IAG.

Scientists concur that a one- or two-degree (at least) increase in average global temperature is inevitable, and will have large impacts. Shifting rainfall patterns and declining total rainfall in many areas will reduce runoff to rivers and dams. Severe heavy rainfall events, droughts, bushfires and pests will increase damage to homes, businesses and infrastructure in urban and rural communities across the nation. There will be new and increased threats to health - and security.

The repercussions for insurers and their customers are substantial. For the industry, protecting the environment and working to minimise the root causes of severe weather is a strategy whose value is self-evident, because such work has the potential to contribute to a long-term reduction in claims.

But there's more to it than that: IAG takes it responsibilities as a corporate citizen seriously. The Group believes it can and should work to make a difference and that it owes it to the communities it depends on for its existence.

While national strategies to deal with climate change and such initiatives as emissions trading schemes are mainly the responsibility of governments, there's much the insurance industry and IAG can do. Reductions in greenhouse gas emissions should be an integral consideration in all insurers' future corporate strategy. Areas of opportunity include the collection and dissemination of knowledge on climate change and helping employees and clients to manage and reduce energy use and greenhouse emissions. IAG is supporting more studies on the kinds of climate-related risks insurers may face in future and to project future losses including:

• funding research into the changes of extreme weather risk in the future climate for different locations
• support for research centres such as the Townsville cyclone testing station to investigate building vulnerability to extreme weather
• support risk frontiers in quantitative natural hazard assessments and risk management
• enabling the insurance industry research unit to continue testing building materials for extreme weather resistance.

IAG is aware too that with change comes opportunity. New business and employment opportunities are emerging in the economic activity that's growing in response to climate change. The challenge of reducing emissions will stimulate new technologies, create new markets and present new opportunities for IAG as consumers seek more sophisticated types of cover and new insurance products that reward lower risk behaviour.

Building Sustainable Links With Our Supply Chain

No matter how large or small an organisation, processes run better when people work together. This is clearly recognised at IAG - teamwork is a core value. Teamwork also underpins our external relationships with suppliers who provide the Group with what it needs to perform well. The Group is working closely with these suppliers to better manage sustainability objectives.

As part of the quest to reduce its environmental footprint, the Group has introduced several initiatives within the supplier relationships. The ripple effects of these projects have positive implications for customers and the environment.

To ensure the Group works with suppliers who share IAG's commitment to sustainability, supplier selection guidelines are being introduced across the Group. These provide standards of sustainability performance for suppliers to work to. Suppliers' input was sought in compiling these guidelines. In addition, every six months principal suppliers undergo performance assessments in several key areas - one of which is sustainability. Criteria include the 'fit' between a supplier's commitment to sustainability and the Group's, as well as a supplier's resourcefulness in protecting their environment. Supplier Performance Reports are compiled and sent to suppliers after assessment to ensure the Group keeps valuable goods and service providers up to speed on performance.

IAG is, however, doing more than implementing measures and assessing outcomes. The Group has begun to develop products to tangibly help suppliers augment their environmental management and safety performance. The first of these is the Risk Radar - an online learning tool that provides users with practical help in managing environmental waste and improving OH&S performance. Currently customised for the smash-repair industry, the benefits of sound practices in the workshop cascade through to customers. If smash repairers show an improvement in the way they do business, their insurance premiums can be reduced. It is intended that the Risk Radar will be adapted to assist a range of other industries.

Just as the Group can't provide products and services in isolation, it cannot make its impact on environmental and social sustainability felt with real effect, if it tries to do this alone. It requires team effort. IAG values the integral role the supply chain plays in supporting and promoting endeavours to minimise environmental and safety risks.