Sustainable underwriting

Across our global operations, QBE provides a broad range of insurance products to personal, business, corporate and institutional customers. They include car, home and travel insurance, tailored business packages and specialist cover for specific industries. By taking an active approach to all risks – however complex – and listening closely to customer needs, we strive to deliver individually‑tailored solutions.

Risk management and embedding sustainability

Just as QBE helps customers to manage their risks, we apply a similar approach to managing our risks and sustainability challenges as a business. This is consistent with our membership of the UNEP FI and being a PSI signatory, where we seek to embed awareness of sustainability issues into our decision-making.

We are fully committed to applying a disciplined approach to risk management and having risk management processes and systems that are robust and aligned to global best practice. Our Group-wide Enterprise Risk Management (ERM) framework incorporates all our key risk management processes: determining risk appetite; governance, risk and control assessments; stress- and scenario-testing; reporting, risk modelling and capital management; and monitoring our risk culture. Further detail on our risk approach is covered in the Group Chief Risk Officer’s report.

Board role

The Board plays a significant role in our ERM framework, defining QBE's risk appetite boundaries and ensuring our risk management strategy is effective. The Board is supported by the Board Risk and Capital Committee, which oversees active, appropriate risk management that accords with our risk appetite, strategy and business plans.

Reviewing material risks, including emerging risks, is an integral part of the Committee’s scope. Members consider material risks through lenses such as capital impact and strategy. Emerging risks include new risks and existing risks that are changing in nature. QBE operates emerging risk forums across the Group to identify and monitor these emerging risks, analyse their potential impact and develop strategies to mitigate and/or exploit them. Currently, areas such as cyber, geopolitical, climate, big data and autonomous machines are being reviewed.

ESG issues are managed within this risk approach.

Responsible underwriting

Our Group Underwriting Standards incorporate principles of responsible underwriting and support our commitment to it. They reflect our definition of responsible underwriting, which includes:

  • Strict adherence to compliance and regulatory obligations that support global efforts to reduce terrorism, corruption, corporate and organised crime and human rights violations.
  • Identifying and integrating ESG issues into risk management and underwriting decision-making processes.
  • A commitment to developing products and services that reduce risk, positively impact ESG issues and encourage better risk management.
  • Working with clients and business partners to raise awareness of ESG issues, manage risk and develop solutions.

Our governance approach supports responsible underwriting. This includes our Code of Ethics and Conduct (see the Governance section of this Report) and our ongoing conduct risk management. Conduct risk can be defined as the risk of unfair customer outcomes and detriment to the integrity of the market in which QBE operates. Our ongoing approach to conduct risk management is designed to cover our business model, strategy, culture, product design, distribution, communication, post-sales activity, product governance and corporate conduct. Our global conduct risk principles provide a framework for the management of conduct risk and are supported by other policies and processes for those divisions that have been assessed as having a higher likelihood of conduct risk.

QBE’s Risk Culture Profiling toolkit has been very well received by our members. In an increasingly changing, challenging and connected world, culture is more important than ever. The toolkit provides a great framework to engage stakeholders and investigate how risk is considered within organisations. The output enables companies to identify issues and address areas they feel they need to improve.

Julia Graham, Technical Director & Deputy CEO of Airmic

Promoting sustainability with clients and business partners

In line with our commitment to the PSI, QBE works with employees, clients and business partners to raise awareness of sustainability issues, manage risks and develop solutions. We offer events, seminars and publications that help clients and brokers build their risk management knowledge and sustainability awareness. We also build awareness in other ways including:

Global Risk Solutions Practice
This global community of risk engineers, risk management consultants and scientists provides a variety of services to customers including risk profiling and evaluation, accident investigation, business continuity, risk assessment, supply chain analysis, environmental management, client awareness forums and training materials.

Risk culture
In 2016, we launched a new QBE Risk Culture Profiling Tool (RCPT) in the United Kingdom (UK) that brings together risk culture theory and extensive claims insights to help businesses become more resilient and successful. In 2017, the Association of Insurance and Risk Managers in Commerce (Airmic) worked with QBE to launch a risk culture profile toolkit for corporate members that included our RCPT. We presented at the Airmic 2017 conference and ran workshops to help their members implement the product.

Ongoing involvement with risk bodies
Our regional businesses belong to local risk management bodies. They encourage employees to be individual members and actively participate in leadership opportunities. In 2017, we sponsored the Risk Management Institute of Australasia’s premier annual risk management conference and worked together to facilitate local chapter and thought leadership activities. In the UK, we continued to be involved with the Institute of Risk Management and presented at several of its events during the year.

QBE Underwriting Academy
This program helps current and aspiring underwriters to develop their skills and expertise. By incorporating sustainability risk topics, it positions graduates to better engage with clients and broker partners on these issues. By the end of 2017, 427 QBE underwriters were participating in the program.

Product development
Through our products and services, we assist customers to address sustainability issues. For example:

  • Since 2005, QBE and Pan American Underwriters have been offering a Wine Industry Property and Liability insurance package that includes a premium credit for Californian winegrowers who have completed the Sustainable Winegrowing Program or equivalent and adopted a standard of continual improvement. The package is endorsed by the California Association of Winegrape Growers (CAWG) and was tailored to meet the needs of their members. QBE also writes the federal crop insurance coverages for many of these industry leading growers.
  • Through our European Operations, QBE is an underwriter to Lumos Global, a Dutch company offering clean and affordable solar power to a market of 1.3 billion potential customers who live off the electricity grid. Lumos Global seeks to enable people in some of the poorest countries in the world to replace hazardous and expensive kerosene generators and lanterns with modern solar electricity that can power lights, cellphones and small electronic devices. Lumos Global offers home and small businesses a simple and affordable way to pay for clean electricity in small instalments using their mobile phones.
  • We are exploring product development opportunities arising from the shift towards electric and autonomous vehicles. QBE’s Australian & New Zealand Operations is working with Tesla and Marsh Advantage to underwrite policies issued in Australia under the InsureMyTesla program, a comprehensive motor vehicle insurance program for Tesla owners.

Impact investing
In 2015, QBE launched the pioneering initiative Premiums4Good. This allows targeted customers to allocate a proportion of their premium to investment in securities with an additional social or environmental objective. For further information, see the Responsible Investments section of this Report.

During 2017, we began several initiatives to improve inclusion. We are developing a new QBE website to meet a much higher visual impairment standard. Our Australian & New Zealand Operations removed the general exclusion for mental health conditions in travel insurance policies.

We have also formed a dedicated Product Disclosure team within our Australian & New Zealand Operations. Work is underway to refresh our product disclosures to ensure consumers from a diverse range of demographics can understand our product offerings and make informed decisions.

Engaging with governments, regulators and other key stakeholders to promote action on sustainability

QBE engaged and worked with government, regulators and other stakeholders on a range of sustainability issues throughout 2017. Examples include:

Tackling discrimination in the provision of goods and services
QBE’s Australian & New Zealand Operations worked with the Australian Human Rights Commission on the research project Missing Out: The business case for customer diversity. This explored the potential for discrimination when providing goods and services, the benefits of understanding what diverse customer groups expect, and how to ensure customers are treated equally and with fairness and respect.

Illegal, unreported and unregulated fishing
QBE’s British Marine business was one of several leading marine insurers that committed to act on pirate fishing. This unlawful practice costs the global economy tens of billions of dollars every year and contributes to overfishing and the destruction of vital marine habitats and ecosystems. By becoming a signatory to a sustainable marine insurance initiative by the PSI and Oceana (an international ocean conservation organisation), British Marine committed to not knowingly insuring or facilitating the insurance of vessels that are blacklisted for pirate fishing.

Senate inquiry into Australia’s general insurance industry
QBE made a submission to, and appeared before, a Senate Economics References Committee inquiry into elements of the insurance industry, including the increase in home, strata and car insurance costs over the last decade. Our submission highlighted the impact of the frequency and severity of catastrophic events on industry pricing and expressed support for “coordination at all levels of government to tackle complex issues, particularly in relation to land development, risk awareness and mitigation initiatives for exposure to natural peril events for certain areas and risks in Australia.”

Australian Government Royal Commission – Banks and Financial Services
In late 2017, the Australian Government announced a Royal Commission into the banking, superannuation and financial services industries. Its aim is to further ensure the Australian financial system is working efficiently and effectively. During 2018, QBE will contribute to the Royal Commission as the review progresses.

Sustainability conferences and events
Throughout the year, QBE representatives attended and spoke at business roundtables, seminars and events on sustainability topics, including impact investing, diversity, climate change, sustainable communities, human rights and sustainable finance. Examples include:

  • In November 2017, PSI and Munich Re held the inaugural PSI event in the US. As a PSI signatory, QBE employees attended the event which focused on the North American sustainable insurance agenda including action around building resilient and sustainable communities and economies. Following the two-day conference, we are exploring opportunities to contribute to coastal resiliency and helping communities to plan for the impacts of climate change.
  • QBE attended the 2017 Accounting for Sustainability (A4S) Summit at St James's Palace in London, an invitation-only event hosted by HRH The Prince of Wales. The annual summit brings together CFOs, investors and other senior members of the finance community to explore practical approaches to exploit opportunities arising from major social and environmental trends, and effectively manage risks. In addition to discussing recent A4S CFO Leadership Network guidance on social and human capital, a key focus of the 2017 summit was climate change and the need for companies to disclose how they are governing and managing climate-related risk. Following the summit, QBE invited Jessica Fries, A4S Executive Chairman, to present to the finance team of our European Operations.

Financial inclusion through microinsurance

For the past two years, QBE Mexico has partnered with microfinance institutions to develop products that meet the needs of low-income customer groups that have not previously had access to insurance. Today, QBE serves over one million customers in Mexico through microfinance institutions.

To offer these products, QBE has streamlined and simplified some operational processes. We have adjusted our claims processes to minimise turnaround times and are accepting digital documents, which increases flexibility and suits rural customers.

One major challenge has been paying claims to customers without bank accounts. In some cases, we rely on the microfinance institution, while in others, we instruct a bank to pay the claim without requiring the insured to have a cheque or deposit account.

Mexico has one of the lowest rates of insurance penetration in the world, but we expect this to change as the microfinance sector expands.