Car insurance is a legal requirement in the UK, so it’s not surprising that the insurance industry is huge, and not just in terms of sales each year. Insurers often hold vast investments in other companies, as we have explained in our home insurance guide.
In the UK alone, insurance companies manage investments equivalent to around 25% of the country’s net worth.
This means that they are indirectly financing everything from tar sands to the sales of arms. In this guide, we have tried to find the car insurance companies with the most ethical approach to investment.
There are two types of insurance company: brokers and underwriters.
Brokers sell policies on behalf of one or more underwriters, and include well known brands such as Sainsbury and the AA. They make money by receiving a commission from the underwriter, once a policy is sold.
Underwriters are the companies that take most of the money from an insurance premium, but which also pay out when something goes wrong. They may not be as visible as the broker’s insurance brand. But it is an underwriter that will hold investments. They therefore wield a significant amount of power in the global economy. That is why we have focused on them for this report.
Just to make things more confusing, some underwriters do sell directly to the public, or belong to the same company group as the broker itself. Others may re-insure a specific risk via a different underwriter (basically insurance for the insurer).
What to look for?
In the UK alone, there are hundreds of brokers – too many to include in our reports, so our ranking tables only include underwriting companies.
Unfortunately, most of us will buy our policy through a broker, so you may have to do some extra digging. You can find the underwriter by looking at the ‘Key Facts’ document that the broker must provide when you are deciding to take out a policy. Comparison websites like Money Saving Expert sometimes also either provide these documents or tell you who the underwriter is.
How we rate companies
Several campaign groups have published reports about specific investments held by insurance companies (or the banks by which they are owned). We have marked down the companies named in these, and have included some more detail about the reports throughout the finance guides. Insurance companies appeared in Don’t bank on the Bomb, Unfriend Coal (see our home insurance guide); and Israel Report (see our current accounts guide).
We also looked for investments in specific companies, beginning with some of the largest in the UK and US such as WalMart, General Electric and Coca-Cola. Where the insurance company holds shares in, for example, a company criticised for pollution, it will also receive half a mark in the Pollution and Toxics column on the table.
Most companies lost multiple marks in this way. Where no ethical investment policy or shareholdings could be found for a company, it was assumed to have investments in companies criticised in all Ethical Consumer categories – as, sadly, is the norm in this industry. We also wrote to these companies to check there wasn’t a policy somewhere we hadn’t found.
Companies with an ethical policy on investments
A growing number of companies have some form of ethical policy on investments. But often these only exclude the most extreme players in a sector, for example those making cluster munitions or over 50% of profits from coal mining. We were looking for something a bit more robust, which crosses lots of sectors. Only one company in our car insurance guide had this: The Co-operative. We have outlined their ethical investment policy in the home insurance guide.
Exemptions for those reporting well
Transparency around investments is rare in this sector. Very few companies publish shareholdings, let alone information about how they use them to steer those companies that they invest in. There were only two notable exceptions in our insurance tables: Aviva and AXA. They scored ‘Top of the Pile’ for transparency, and were not therefore marked down for their investments.
ClimateWise is a voluntary insurance industry initiative, focused on responding to the risks and opportunities of climate change. The companies involved commit to take action in many ways: through leading risk analysis, informing public policy, supporting climate awareness, and incorporating climate change into investment strategy. Almost all the companies in our table were signed up
Ethical Consumer considers membership to be an important step for insurers towards addressing climate change: those who were not signed up therefore lost half a mark in the Climate Change category. Those companies were: Esure Group, Markerstudy Group, Ageas, J.C. Flowers & Co., Admiral, Legal & General, NFU Mutual, Liverpool Victoria, Covea, The Co-operative Group, American International, AXA, Marsh & McLennan, and Red Sands.
Tax avoidance is known to be pervasive in the financial sector, and the insurance industry appears to be no exception. Almost all those companies that had business abroad also appeared to have lots of high-risk subsidiaries registered in tax havens. Companies that got a worst rating for likely use of tax avoidance strategies lost a whole mark under Anti-Social Finance, and those that got a middle lost half a mark. The Co-op Group stands out as a FairTaxMark accredited company.
Best: American International, Ageas, Admiral, Direct Line, Esure, Liverpool Victoria, The Co-op
Middle: Covea, Lloyd’s of London
Worst: Allianz, Aviva, AXA, Markerstudy, Hiscox, J. C. Flowers & Co., Legal & General, Marsh & McLennan, Munich Re, NFU Mutual, Red Sands, RSA, Tesco
Red Sands even gave a history of Gibraltar’s (lax) tax laws on its website!