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The world is currently going through a serious transformation due to climate change: Glaciers are melting, sea levels are rising, and extreme weather events are getting more intense and frequent – among other consequences.

In addition to an environmental crisis, this transformation is producing a widespread public health crisis. How exactly does climate change impact human health? And how can the insurance industry prepare its product development processes now to be ready for the changes to come?

Health Impacts of Climate Change

According to the World Health Organization (WHO), climate change is expected to cause approximately 250,000 additional deaths per year between 2030-2050. The estimate covers mortality due to various impacts of climate change: 38,000 due to heat exposure, 48,000 due to diarrhea, 60,000 due to malaria, and 95,000 due to childhood undernutrition.

While climate change may bring some localized benefits health-wise, the overall health effects are overwhelmingly negative:

• High temperatures raise the levels of ozone and other pollutants in the air, contributing to heat-related illnesses, cardiovascular, and respiratory disease.
• Rising sea levels and extreme weather events may force people to move, increasing the risk of a range of health effects, from mental disorders to communicable diseases.
• Variable rainfall patterns can affect fresh water supplies, compromising hygiene and increasing the risk of diarrheal diseases.
• Frequent floods can contaminate water supplies, increase the risk of water-borne diseases, and create breeding grounds for animal vectors such as mosquitoes.
• Variable precipitation and rising temperatures can decrease the production of staple foods, increasing the prevalence of malnutrition and undernutrition – currently causing 3.1 million deaths every year.
• Climatic conditions affect water-borne diseases and diseases transmitted through insects, snails, or other cold-blooded animals. For example, malaria is strongly influenced by climate and accounts for over 400,000 deaths per year.
• Unmitigated greenhouse gas emissions are likely to increase disease burdens, with a major impact on developing countries with weak health infrastructure, the least able to cope without assistance to prepare and respond.
• Air pollution is associated with many health problems, particularly lung diseases and increases in premature deaths.

Another significant cause of morbidity related to this emergency, the direct and indirect impacts of climate change on mental health will also need specific attention over time.

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The Most Vulnerable Populations

Researchers have observed mean temperatures and mortality data from multiple locations (451 locations across 23 countries) to estimate the relationship between temperature and mortality under different climate change scenarios. For extreme temperature intensification, findings confirm that as temperatures increase, mortality risk also rises, and therefore warmer and developing regions of the world are disproportionately affected by the negative health impacts of climate change.

And while all populations suffer, developing countries are particularly vulnerable to the direct and indirect impacts of climate change for various reasons. To name a few:

• Inadequately developed infrastructure
• Deficient medical and healthcare facilities
• Protracted recovery from major climate disaster
• Agriculture-dependent economy

Insurance Product Trends and Opportunities

The negative health impacts of climate change are starting to lead to an increased burden on healthcare and higher healthcare-related costs. From an individual’s perspective, financing continuously rising costs can be a challenge, especially if one has to care for multiple family members.

The kind of help that consumers need from insurance in such crises goes beyond covering medical bills: They need protection for potential income losses and financial security for their families, and they need solutions that are easily accessible. Adverse situations may bring renewed awareness of and need for insurance, which can serve as the source of new product development opportunities for insurers looking to better serve consumers.

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Recent product trends showcase how insurers can address the unique needs of consumers today and into the future. As an example, let’s look at four critical illness (CI) trends that highlight the adaptability that may be required to respond to challenges such as climate change:

• Flexible CI cover provides consumers the opportunity to customize conditions or benefits that fit both their needs and wallet.
• Comprehensive coverage features conditions, surgeries, and treatment that don’t normally fit the traditional CI definitions.
• Family features cover multiple members, as well as different generations.
• Impaired lives are being approved for coverage with certain products to expand the insurable population – this trend is also developing in the health insurance space.

The diversification of distribution channels is another growing trend, and one that’s being accelerated by the ongoing COVID-19 pandemic and could be also influenced by climate change. Furthermore, wellness and value-added services continue to evolve from prevention to treatment and diagnosis.

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Product Design Considerations

The adverse health impacts of climate change range from mild conditions and infections to critical illnesses, and therefore insurance propositions need to be structured to provide flexible and comprehensive protection. The most straightforward approach would be to identify conditions that can be linked to environmental changes, but are not covered under the current CI product. Alternatively, booster benefits can be offered to provide protection in addition to existing conditions. To encourage healthy consumer behavior, the purchase of air purifiers or completion of lung function tests could be incentivized through a rewards program. These benefits could be incorporated into a simple wellness feature.

However, this example framework doesn’t mean that all benefits need to be included in one single product. Depending on the distribution channel, premium range, and the marketing angle, each element can be packaged with sustainable products for differentiation, in addition to being tailored for different market needs.

Economical propositions can offer protection for individuals under financial pressures. Currently, there is a high demand for affordable insurance products that can be shared by multiple family members. In India, home to some of the most polluted cities in the world, the family floater medical plan allows family members to share the annual limit. While this product has been around for a while, we are yet to see such family features in the CI space.

Different generations call for different types of solutions, and such differences may become more pronounced as the negative health impacts of climate change continue to take effect:

• For aging parents, who belong in the high-risk segment, policyholders could be given the option to purchase coverage for their parents, and create value and protection for themselves at the same time.
• For couples, who already share so much in their lives, sharing protection is a natural fit. Such solutions could not only offer sharing of different types of benefits, but also pool the financial assets to achieve optimal underwriting results.
• Parents of children, who are trying to balance savings and protection needs, could be offered innovative juvenile policies that optimize protection value.
• Families could share a pool of CI benefits, similar to the family floater concept, so that they don’t need to worry about coverage specifics. The value would be maximized for families, small or large.