Insurers need their own Hippocratic Oath

Does insurance have a role to play in setting the ethical standard for corporate ESG and promoting a ‘do no harm’ philosophy?"

Insurers are the doctors of the economic world.  They assess and 'heal' financial loss just as a doctor assesses and treats medical need. But, while the medical profession promises to "do no harm", the  insurance profession has no equivalent Hippocratic Oath.  Is it now time for insurers to take responsibility for the risks they insure?  Is it time for insurers to make an oath to "do no harm"? 

Some activists argue that it is, and some insurers agree – just look at those that are exiting coal or refusing to insure mining companies. But, says Peter Mansfield, Partner at RPC, a UK law firm: “Insurers are only just starting to face up to the growing complexity of Environmental, Social and corporate Governance (ESG) demands. We need a wider debate on what it means for insurers to ‘do no harm’.”

Because 'doing no harm' is the fundamental aim of ESG.  The central message is that companies must do no harm to the environment, to society or to a company's own governance.  Yet, this interpretation of ESG sits uneasily with shareholder theory, which argues that the only duty of a company is to maximise value for its shareholders.  "At the heart of ESG, you have this paradox," says Mansfield.  "It is ostensibly about ethics, yet it aligns with shareholder theory, on the back of research that showed that ESG policies generated greater returns for shareholders."  

So is ESG about ethics or about profit?  This matters because "do no harm" is already a tricky concept to pin down.  To burn fossil fuels is clearly harmful, but suddenly to stop would create a different type of harm.   Nor is there universal agreement on the best route to a universally acknowledged good, such as net zero by 2050.  “It’s not always clear who should make the decision on the best road to take,” says Mansfield. 

Some would say that insurers should make that decision and should drive the future by withdrawing its support from certain industries.  But traditionally insurers have been enablers of the corporate world, leaving it to governments and regulators to make those big, directional calls. Its innovation and creativity has always been directed towards the products that facilitate industry, without passing judgments on the conduct of that industry. 

That is not to say insurers should be blind to cultural change or moral relativity. “Of course insurers must deal with the world as it is,” says Simon Laird, Global Head of Insurance at RPC. “But they must also be cognisant of upcoming change, and it is by understanding the world as it will be that insurers can help smooth the corporate path to cause the least amount of harm.”

Perhaps the most appropriate role for insurers, therefore, is to be agents of evolution.  Whilst insuring the present, insurers must also create products to insure the future.  For example, each stage of the transition to net zero will involve new risks and new products.  We are already seeing the insurance of geothermal finance risk, of coral reefs and of solar generation.  These are new products that will hasten the transition.  Those insurers who anticipate our future will benefit not only their shareholders, but their grandchildren. 

In this sense, insurers are changing from the reactive industry of old. “By sharing the weight of the changes that are to come and being agile enough to respond quickly with new and innovative solutions to support this changed world, the industry can speed up the process of transition,” says Laird. “That’s a role that brings insurers on to the global stage, helping companies move forward on issues as complicated but as urgent as climate change.”

So, should the insurance industry adopt its own Hippocratic Oath?  Yes, yes and a thousand times yes, but an oath to "do no harm" is not the same as making a moral judgment about what "harm" is.  It is the corporate world's responsibility to evolve to meet the challenges ahead and it is the insurance world's responsibility to hasten, and not to harm, that evolution.   

This article was originally featured in 'The Future of Insurance' - a joint publication with Raconteur and The Times, published on 22 March 2022. You can download the publication in full here.