Transforming Insurance: How Premiums for the Planet is Tackling Climate Change

Hi and welcome to the Impact on FinTech TV.

I'm your host Jeff Gitterman.

Today we're joined by Brad Stevenson, who is the CEO of Premiums for the Planet.

Brad, thanks for being on the show today.

Thanks for inviting me.

It's a pleasure to be here.

This is so interesting for me.

I heard about your company and was really excited to interview you because we're always talking about the problems inherent.

In the insurance industry because of climate change and what's going on there and we're always thinking through about having guests on the show that can talk about the problems we haven't had anyone really talking about the solutions though, so this is exciting for me that we get to talk about solutions but we before we dive in, tell me a little bit about what drove you and where was your passion to get involved with premiums of the planet and start it.

Thanks.

So it actually started pretty early and it started from a social justice perspective.

Growing up in the Midwest in a pretty homogenous suburb of St.

Louis, my eyes were open to just the broader system that we live in and social justice related went to school during desegregation, and that was eye opening to see the broader landscape of how we live and how others live.

I've spent most of my career from that point really looking for intersections where there's a way to use the system that we live in to scale or drive changes.

Um, I first actually started my career in diversity consulting in the early 90s in Chicago and didn't feel like I was going to make the difference that I wanted to make then, so went to the Boston Consulting Group, try to understand how our system works better and to be able to come back at some of the challenges with that insight.

Use market forces or align stakeholders in a way that we can put a tailwind behind some of the purposeful change that we need to see and accidentally had never really looked at finance or understood the role of finance. had the opportunity to be at the intersection of banking and climate, and once you see the power how hidden it is but how pervasive it is of our financial systems and the perpetuation or the dissolution of so many of the challenges that we currently face, you can see it.

And so in doing banking, it was really powerful work that we did over a period of years of movement building alongside NGO partners. saw insurance as not only a potentially equal if not more potent lever for this change, but also one that we could impact more quickly at greater scale and with more powerful outcomes.

So let's make sure that the audience understands the problem because from our perspective we're always talking about the fact that reinsurance companies are faced with claims that they can't cover profitably really going back as far as 2017 and 2018 where they started to run into problems and.

It's due to climate change and we're having more storms, more hail storms, which is incredibly expensive, but there's also a lot of coverage around fires and just heat waves and droughts and other things that are the unfortunate benefit of a warmer planet.

And when you look at these companies and you see that they're having all these problems, what occurred to you that there was maybe a way of addressing.

Because these companies are also doing a huge amount of investment in fossil fuel companies at the same time, so they're they're on their own see-saw basically they're seesawing by themselves and running back and forth, um, where did that occur to you that I can maybe enter in here and as you said, create a powerful lever.

Yeah, no, it's really well said and it is, it's ironic what we see, but insurance as an industry is incredibly powerful.

One of the most influential forces we have in a market economy, the apex driver of the direction of of what projects and industries and practices proliferate or which ones transition away. uh, it's it's like the regulatory power of government at the speed of business.

And that works on a few dimensions.

One is, as you mentioned, the investment.

We spend $7 trillion collectively a year sending insurance premiums to insurance companies that they then invest, and as you referenced in many cases they're still investing in expansion of fossil fuels in a way that is contrary to then accelerating the storms and the wildfires that are destroying the assets that they hold.

The other is just their decisions about what to insure or not to insure.

What they exclude or don't exclude in coverages has tremendous impact on what materials or processes are either stalled or adopted, what technologies can expand and scale or get stuck because you can't operate a business without insurance.

So if you're a new technology company and you can't get insurance, then you're not going to be able to raise money.

And then you're not gonna be able to scale, so it, it's a fundamental throttle on, on all of the developments of a market economy.

Yeah, when I was looking backwards at similar situations to climate change, what came across my table or computer or whatever was the fires that we were having, you know, hundreds of years ago in all major cities.

I mean, every.

10 or 20 years a major city would have a huge fire.

It would cost millions of dollars to rebuild and at some point the insurance company came in and said we're not going to insure these buildings anymore unless you start using other techniques, fire treated wood, other things.

So it was the first.

Inkling to me that we would see the first lever of repricing in the capital markets when insurance companies started to say no.

I thought that would happen a little bit later, but we started to see by 2022 that insurance companies are now leaving states and making decisions because of climate change, but the investment landscape of those insurance companies premiums don't seem to be changing as fast as they start.

So at first they're starting to reduce the risk as much as they can.

They're not addressing the fact that they're part of the cause though, so how do you talk to them and approach this as a solution?

Yeah, well said, I mean, ultimately the irony of their investing and insuring the things that are accelerating climate catastrophes that are then raising insurance rates or reducing the access to insurance at the same time undermining the values and the missions of the organizations that are that are insuring through them that are sending money that is then invested in. things that are Accelerating, so it's it's ironic and our approach to it is collective action.

In short, so to simplify the insurance value chain, you have the policyholder that is looking to buy an insurance policy and transfer risk.

On the other side you have the insurance carrier that is issuing or offering that policy in the specific coverages and terms associated with it.

And then in the middle you have the matchmaker, the brokerage organization that is helping that policy. identify what kinds of policies and risks they have and finding them in the insurance carrier market.

So our approach to this is to change the demand dynamics of the market.

We have first of all built what I would call an impact brokerage platform.

So in that value chain that brokerage function is a natural organizing platform.

It's a natural place to aggregate influence, the brand voice and the insurance spend.

Of climate conscious and social justice conscious organizations and then we paired that with a um membership type of uh uh climate action community so similar to a 1% for the planet or protect our winners or conservation Alliance all of those who are our members uh and who have who bring their work and their insurance through our brokerage platform.

But when organizations join those types of groups like a 1% for the planet, they become members of a community where they can not only further their missions and create impact in the ways they want, but they can also do so visibly in a way that returns a benefit to their stakeholders and their brand.

And so we've combined those two concepts to.

One build the market dynamics that create incentives for insurance carriers to lead.

To be able to create an environment where we can innovate and we can make greater economic viability for the kinds of innovations we need to see insurance serve as a transition boost, a way to make something investable that might not be a way to support organizations to scale their technologies, so a place where we can innovate as well as when the market speaks and we organize the.

Uh, the demand for climate conscious insurers then also we create a, uh, a better environment to embolden regulatory reform or, or, uh, policy reform.

So when the broker is going through this exercise through premiums to the planet, is he.

Does it wind up costing the consumer more money, or is he looking for the best policy and the most sustainable company that provides that policy, or is the customer willing to make a decision that I'll spend a little bit more money if I'm working with a company that is not contributing to the problem?

Yeah, thanks for asking because that's foundational to what we do and how we do it um and and our belief there any solution that.

Perpetuates the stereotype that we want to do something sustainable.

It's going to be more difficult, cost more, and we're going to get less.

That sustainable means sacrifice, but do it because it's the right thing.

We're sunk that that is not going to create change at the scale that we need to and it's not unfortunately because it should, but I understand your point.

Yeah, so we've very intentionally built premiums for the planet as a way to again this brokerage platform, it's organizations are already using brokerage.

They're already spending money on insurance.

It's a familiar part of the process that's substitutable and so what we're able to do is bring them into our brokerage platform.

It cost them nothing.

It takes the money that they're already spending on insurance.

It uses a business process that's fundamentally familiar and that they're already using.

It improves service, has the opportunity to improve economics, and at the same time it takes that indiscriminate administrative cost and turns it into impact and mission alignment and brand visibility brand value where organizations are now spending their same money on something that is driving system changes, reducing pain points to their insurance procurement.

And delivering ultimately on insurance becoming a tailwind to sustainability and using its influence.

When you say brand building, does the broker get to use it to build his brand as well?

It's a part of it.

Our brokerage partners are able to represent their participation.

More importantly, for the market that we're organizing for that collective impact, it's the ability to take that money that you were spending anyway and now it's co-educate with it to be a part of this movement.

To represent an organization's participation in the program and that we also promote their involvement and we're all together with our nonprofit partners.

Educating and promoting this movement to shift and harness the power of it.

Are you finding insurance companies friendly to this push, or are they pushing back against it?

What's the environment right now?

Yeah, it's been really inspiring.

I mean, we started a short time ago, but there in the conversations we've had.

They actually welcome it in the sense that right now when we're asking insurance carriers to do things more sustainable, we're asking them to do things like divest from their investments in oil and gas expansion or divesting their insurance coverages.

We're asking them to give something up.

Our approach to this is to say.

We want to create a financial opportunity.

We understand what drives the single bottom line driver of most insurance organizations, and we want to use that same market opportunity to attract them and to give them the ability to step in and step up as the heroes that we actually need in the current crisis and to to let them pursue something that's going to be beneficial on the other side as well.

How do we in send customers to drive their business through this brokerage network?

Yes, so I think the first is awareness.

Most individuals and most organizations, even some of the most climate conscious organizations out there, insurance isn't on the radar.

This is the biggest lever we have that's hidden right in plain sight.

So the first is just once you're aware of this, as I said related to banking, you can't unsee it once you understand the layers and the power and the influence that this has.

The second, and what we've done is to make it a no-brainer to essentially.

We do all the lifting.

If there are a lot of organizations out there that if they knew and if it wasn't going to cost more, if it was going to actually improve service and economics and build brand value and reduce reputational risk at the same time because this is inevitable, the levers of finance and the intersection with social justice and climate, they're out of the bag.

They're not going back.

And so our feeling is that if you make it easy and you add value to it instead of adding cost that organizations will sign up it's it's sensible.

I mean, I posted on LinkedIn just the other day about Swiss Re coming out with a study that basically said they've underestimated not just they but that the reinsurance industry has underestimated climate risk over the last 5 years to a huge degree and.

I mean comments on the LinkedIn posts are like, wait a minute, that's the only thing insurance companies are supposed to do is assess risk.

That's supposed to be their wheelhouse and yet.

I think people have a hard time understanding that we've built systems on top of a stable climate for 12,000 years and now all of a sudden we are moving into an unstable climate.

So those models that have all been built, it's literally being rethought as we go about it.

And yes, climate models may be.

But really understanding where that risk of those warming temperatures actually hits in local marketplaces is what is really hard to figure out and bill.

So I just don't want to knock the insurance companies completely on that front, but on the same front, I'm sorry, on a different front now that they're admitting.

That this is a huge problem, stop funding the problem.

So I think the work that you're doing is incredibly admirable.

Anything else you want to tell our audience before we finish up? just really impress upon them of the power and the influence and the potential.

I mean, the insurance industry could be our greatest hero for sure.

And also the status quo isn't going to change itself.

It's too entrenched.

And so the way things work in our market economy is we build a market and so join our movement, come and bring the money that we're already spending anyway.

To organize into a sustained coordinated market force that drives reframes the incentives so insurance companies can again step in and step up and be the heroes that they truly can be and we can innovate.

And when you know when you say the status quo won't change by itself, the one thing about insurance companies that's different than any other system is that ultimately they only care about, well, not different, they only care about profit.

And they're not entrenched in any kind of operational system, systemic efficiency, so they don't have factories, they don't have warehouses, they don't own oil wells that God forbid you change the system tomorrow.

They are going bankrupt on.

So insurance companies will pivot.

They're starting to pivot by escaping local environments where the risk is getting too expensive.

I think you've hit upon the best lever that there is because they are the most nimble.

Of the large industries that we have at our fingertips that we deal with on a daily basis, that can shift quickly and then once they shift, it forces the whole rest of the marketplace to shift with them, so.

Kudos to you for thinking of this really incredible lever, and I definitely want to have you back and keep track of how things are going in the marketplace and the system and anything we can do to help and broadcast it or let people know about it, we will certainly do.

Thank you, deep gratitude and the only thing I'd end is just we can do this, yeah, for sure.

So thank you.

Thank you, Brad.

That's it for the impact on FinTech TV.

I'm your host Jeff Gittermant until next time.