Ethical Home Insurance

Ethical home insurance companies

In this guide we look at home insurance companies’ investment and climate policies, their more shady tax arrangements and weapons connections.

With one brand scoring zero, and two Best Buys in the guide, there are clear differences between the least and most ethical providers, with many of the companies we reviewed clumping in the middle of our score table.

Buying ethical home insurance

An important but underrated way of shaping the world is by choosing an ethical insurance provider.

While on the surface their main activity is to safeguard your property or vehicles against the risk of loss or damage, their main impact on the world arises from, it could be argued, their insurance and investment choices and exclusions.

What's the difference between underwriters and brokers?

There are two main types of company that sell insurance – underwriters and brokers.

The underwriter is the actual insurance company that pays out on the claims. While they do often sell directly to the public, many also sell through 'brokers' such as the AA, John Lewis or Policy Expert, which take commission.

We are only covering underwriters in this guide because these are the companies that hold the assets and which, therefore, create policy on whether to make ethical investment decisions. They can also create policy on whether or not to insure coal plants and other controversial projects.

If you are buying through a broker, you should be able to find out the underwriter from the ‘Key Facts’ document which must be provided when you’re considering buying a policy. Comparison websites will also sometimes tell you. If your broker or website won't say who is underwriting a policy proposal, try another broker.

To complicate matters, brokers can sell policies from a variety of underwriters. And underwriters selling directly to the public can sometimes use different underwriters for other specific policies and risks. To be included in this guide, a company must have an underwriter somewhere in the company group.

By way of example, Naturesave offers policies from companies including Aviva, Allianz and Ecclesiastical. It is owned by Benefact Group which owns Ecclesiastical too. A change of underwriting approach and ownership at Naturesave since we last reviewed home insurance providers means that we now have a clear Best Buy for some types of insurance.

How much does home insurance cost?

Before January 2022 companies were allowed to increase the premiums of loyal customers (e.g. those that forgot about their insurance and had their policies automatically renewed, or who didn't have time to research alternatives, or who didn't have any better ethical options to switch to).

In 2018 six million of these loyal people could have saved a total of £1.2 billion had they shopped around. Fortunately this is now in the past due to new legislation that makes it illegal to charge less for new customers than existing ones. According to ABI (Association of British Insurers), the average price of home insurance has fallen to the lowest since records began (which - let’s be realistic - was in 2012, but still).

It is still worth getting new quotes as your renewal date approaches. Insurers may still find legitimate reasons to increase your premium, for example if they consider your neighbourhood more risky than before.

Price comparison sites are the most popular way of finding quotes. They can be used in conjunction with our ethical ratings to help make a sensible choice all round. Check more than one comparison site and don’t forget that they get commission from insurance companies. Indeed, there is a new player on the sidelines preparing to stand on the pitch: Amazon is to launch a new insurance comparison site in the UK. We would strongly advise against using it. (Our Boycott Amazon campaign page explains why we think this company should be avoided.)

Insurers and climate change

Another crucial aspect of insurance companies’ practices is their approach to climate change. Unfortunately, all of the companies in this guide scored worst and lost a whole mark due to this.

The reasons behind this are several fold. One aspect that all companies but Covéa and Hiscox fail on is fully reporting on their indirect (Scope 3) emissions. This includes for example, emissions from  supply chains and business travel, but crucially, also investments. Calculating emissions from investment portfolios is not easy but certainly not impossible either.

Companies are still very willing to invest in fossil fuels, and in particular, coal. But we can see a trend for divesting. Although most companies that cared to set a threshold for their coal related investments set it at around 30%, some went lower.

• Aviva and Direct Line for example commit to divest from companies which make more than 5% of their revenue from coal but they both leave a loophole saying “unless they have signed up to Science Based Targets”.
• Naturesave and Ecclesiastical are only willing to invest in a company if its revenue from coal is less than 10%. But they go further, apart from checking for %, they are also incorporating various further considerations reflecting ESG (Environmental, Social and Governance) risk.

Apart from coal, companies make climate commitments of various shapes and sizes. Indeed, it is somewhat of a surreal experience reading about how a company is changing its office lighting to L.E.D. while it is investing millions into fossil fuels. But some insurance providers are definitely greener than others.

• Ageas says that it is committed to growing profitably through ethical and responsible investments but doesn’t give much details on the how.
• Covéa just says that it can “contribute to the reduction of our customers’ and members’ emissions by making specific offers to them”.
• Direct Line said that by 2030 the Group will have reduced by 50% the weighted average carbon intensity of corporate bond portfolios. While this sounds good at face value, carbon intensity is not the same as total carbon emissions. Intensity-based decarbonization goals are controversial, as they do not guarantee absolute emissions reductions.
• Hastings just says that it has a responsible investment framework but doesn’t give details.
• Lloyds has a somewhat confusing commitment to not financing new clients in the oil and gas sector “unless it is for viable projects into renewable energy”.
• MORE  TH>N’s parent company, Intact Financial Corporation also still invests in companies working in thermal coal. But somewhat compensating that, in 2021, renewables made up 61% of its UK energy underwriting portfolio mix. This of course still means 39% non-renewable.
• NFU Mutual is just encouraging its fund managers to consider ESG factors, but they also say that "We do not believe that ESG is ‘green’ investing and therefore do not exclude specific sectors deemed to be ‘non-green’ such as Oil".
• Saga does not appear to disclose its plans to reduce the emissions of its investments, except that it ‘ensures’ that ‘robust’ ESG factors are considered when making investments.

Better approaches were:

• Aviva has £1.4 billion invested in low carbon assets which is 56% of its 2025 investment target.
• AXA is applying the “Warming Potential” methodology for its investments and has a green investment target of €26bn by 2023.
• Naturesave has adopted new exclusion criteria and removed fossil fuel exploration and production and thermal coal from its investments - as long as it counts for more than 10% of the company’s revenue.
• Virgin Money has very low exposure to oil and gas (0.2% of lending) and a robust sensitive sectors policy in place.

Insure Our Future campaign

Insure Our Future is an international campaign calling on insurance companies to exit coal, oil and gas in line with a pathway limiting global warming to 1.5°C.

Insure our Future demands that companies:

• Stop insuring new and expanded coal, oil and gas projects.
• Phase out insurance for existing coal, oil and gas projects.
• Divest from coal, oil and gas companies that are not aligned with a pathway to limit global warming to 1.5°C.

In October 2022, it published a scorecard assessing and scoring 30 global insurance companies based on the effectiveness of their policies to phase out the provision of insurance and investment to coal, oil and gas companies.

The scorecard did not cover all the companies in our insurance guide but included four of the biggest companies – Allianz, Aviva, AXA, and Zurich. They all scored relatively well for their policies on underwriting fossil fuels, as can be seen in the table below.

Worldwide, most large insurers have now backed away from insuring new coal projects but many are still insuring existing coal operations. Allianz, Aviva, AXA, and Zurich are four of the 14 companies in the report that have committed to phase out support for existing coal operations.

The shift away from oil and gas, however, is slower. Allianz has adopted significant exclusions, but Zurich and AXA continue to insure new oil and gas projects in defiance of climate science and evidence.

Overall, Allianz ranks as the insurance company with the strongest policies on restricting fossil fuel underwriting, having adopted significant restrictions on oil and gas in April 2022.

Peter Bosshard, Global Coordinator of the Insure Our Future campaign said,

“Insurance is the Achilles heel of the fossil fuel industry and has the power to accelerate the transition to clean energy. All insurance companies must immediately align their businesses with the 1.5C goal of the Paris Agreement and cease insuring new coal, oil and gas projects.”

On average, the 30 insurers assessed for the Insure Our Future report scored 3.3 out of 10 points for their coal underwriting policies but only 1.1 out of 10 points for their oil and gas policies. Read the full report on the Insure Our Future website.

How transparent are insurance providers about their investments?

According to the Association of British Insurers (ABI), the insurance industry in the UK is managing £1.8 trillion of investments. This is equivalent to around 25% of the UK's total net worth. While this figure includes life and health insurance too, have no doubts that general insurers take their fair share.

These huge sums mean that an insurer's investment policies are of crucial importance to ethical consumers. Without scrutiny, we may inadvertently be funding unethical activities like Arctic oil drilling or unsustainable palm plantations with our premiums.

We rate companies by looking at their investment practices from three different angles:

1. Investment policies – we expect companies to have a clear policy restricting investments in at least three of the following key problem areas: fossil fuels, deforestation, indiscriminate weapons, human rights violations, and animal abuse.
2. Investment disclosure – we want to see companies that are invested in being named, not just sectors.
3. Engagement disclosure – we want to see how they voted at the AGMs of companies they invest in.

The table below shows how insurance companies fare when rated against these criteria. We often see vague policies which do not provide strong evidence that certain companies would not invest in problematic areas.

Note that the worst rated companies in this category, although they may appear higher up our score table than others, will not be recommended buys.

Apart from AXA and EdenTree (Benefact’s investment arm), none of the companies restrict all investments in at least three of the problem areas.

Most companies have some kind of restriction on investing in coal mining – exceptions were Saga, esure, NFU Mutual, UK General (now Bspoke Underwriting) and Tesco – but only EdenTree and AXA discuss restrictions on deforestation and human rights, for all assets.

EdenTree stays on its own when it comes to restrictions relating to animal abuse.

Pay inequality in insurance

The finance industry in the United Kingdom has been known to be the worst performing in terms of pay between full-time male and female employees. But while the gender pay gap has been found to be 27.4% for financial service activities, it was ‘only’ 12.2% in the insurance sector.

There is still scope to improve. Our article on the finance sector and the pay gap has more detail.

Solar panels insurance

If you have installed solar panels, what should you do with them when it comes to your home insurance?

Solar panels will increase your home’s rebuild value and as they aren’t cheap it is sensible to add them to your home insurance.

They will be covered under buildings insurance and most policies these days include solar panels as standard. They should be covered for damage from bad weather, fire, falling trees and subsidence, as well as theft and vandalism. But it is always best to double-check with your provider exactly what’s included, as policies can vary.

How do some of the insurance providers rate for different ethical issues?

Below we focus on a few of the categories where we have reviewed and rated the home insurance providers.

Tax avoidance

Tax avoidance strategies appear to be prevalent in the industry.

Apart from Admiral, Churchill, Covéa, Direct Line, Ecclesiastical, Naturesave, NFU Mutual, and Virgin Money, all the other companies in our guide showed signs of likely use of tax avoidance. UK General Insurance (now Bspoke Underwriting) did not get marked down for this, but over the last five years has had two different owners, themselves registered in the tax havens of Bermuda and the Cayman Islands.

Anti-social finance

Some of the money that companies save on taxes goes towards their management remuneration. All but one of the companies lost a whole mark for paying (well) over £1 million a year to their directors. UK General Insurance (Bspoke Underwriting) didn’t report how much it paid to its staff.

Arms and military supply

With war raging just a couple of thousand miles away you may be more interested in knowing which companies finance arms. Aviva, Allianz, and Lloyds Bank were all named in the ‘Don’t Bank on the Bomb’ report highlighting investments in nuclear weapons.

We have a separate article which looks at banks and military spending.

Positive scores

Covéa and NFU Mutual received half a mark for being (owned by) mutual organisations, and Naturesave received a whole mark for being owned by a registered charity.

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Additional research for the guide by Sorcha Perris.