Climate change, which causes heat wave-related deaths, climate-sensitive infectious diseases, changes in physical activities and other health issues, is forcing insurance companies to recalibrate premiums and offerings, as health takes centre stage at international climate talks in Egypt.

While challenges remain in accurately integrating climate risks into products, insurers are starting to take action to account for a huge protection gap, as many people worldwide are still underinsured or have no health or life insurance.

“The insurance industry is starting to see the correlation of climate change [and] the state of people’s health,” said Joan Collar, Asia and Pacific regional leader at Mercer Marsh Benefits (MMB) under New York-based insurer Marsh McLennan.

As climate change-related natural disasters become more frequent, there should be more health-linked insurance programmes to address the problem, she said.

According to the World Health Organization (WHO), between 2030 and 2050, climate change is expected to cause around 250,000 additional deaths per year globally from malnutrition, malaria, diarrhoea and heat stress.

By 2030, it is estimated that the costs of direct health damage, excluding the costs in health-determining sectors such as agriculture and water and sanitation, will range between US$2 billion to US$4 billion a year, the WHO said.

Global leaders and decision-makers should “put health at the heart of negotiations” during the United Nations climate summit, known as COP27, taking place this month, WHO director general Tedros Adhanom Ghebreyesus said last week.

With China experiencing record-high average temperatures and a rising number of extreme weather events, people in the country are also increasingly threatened by the health risk caused by a changing climate, according to a report published last month by the Lancet Countdown Regional Centre based in Tsinghua University in Beijing.

Last year, regions across China saw an average of 7.85 more heat wave days than the average level from 1986 to 2005, with the number of estimated related deaths increasing by 13,185 to 24 966 in 2021 alone, according to the report.

The economic costs of heat wave-related mortality of working-age people amounted to US$109.4 million last year, about five times higher than the costs in 2002, the report said, while the economic costs of heat-related labour productivity losses, stemming from work hours lost and the consequent business interruption, reached US$285.8 billion, or 1.68 per cent of China’s gross domestic product (GDP) in 2021.

Rising temperatures in China also led to a significant increase in cases of dengue fever – one of the most rapidly spreading climate-sensitive diseases in the world, according to the report. More alarming for China’s ageing population was the finding that people aged over 65 are the most clinically vulnerable to climate-related health risks.

Although there are few widely accepted insurance products geared towards employees or individual consumers that are indexed specifically to the effects of climate change, the insurance industry is seeing growing demand and changes.

“The absenteeism from work due to climate change such as heat waves and poor air quality, or flooding-related diseases such as cholera, has started to seep into the predominantly outpatient care,” said MMB’s Collar.

According to the company’s Health Trend report released this year, respiratory conditions related to air pollution are the top cause of claims in Asia in 2021.

However, the climate-related insurance protection gap remains huge at around 90 per cent in Asia, according to a report by reinsurer Guy Carpenter in July. In China, the gap was US$76.4 billion, or 0.6 per cent of the country’s GDP in 2018, according to a report that year by London-based insurance company Lloyd’s.

The insufficient protection can be attributed to a number of factors, including limited incentives by the government to implement the necessary policies to reduce the gap, as well as affordability, a major barrier to insurance access.

“Another key challenge faced by insurers is to predict climate risk accurately and integrate it into product offerings,” said Gordon Watson, CEO of AXA Asia and Africa.

Marshall Lee, head of climate and sustainability strategy at insurance broker Marsh Asia, also said that technical challenges caused by the lack of data are hindering the development of new insurance products and the capacity for extending the coverage of existing products.

As natural disasters become more frequent and severe, insurers need to better assess and manage the climate risk exposure of their investment and underwriting portfolios, Lee said.

That could involve climate scenario analyses, natural catastrophe modelling and advanced insurance analyses, he said, adding that insurers should continue to innovate on products and solutions to help the global economy manage the impact of climate change and support an orderly transition to net-zero carbon emissions.

“Climate change isn’t just a long-term threat – it is a health crisis,” said Watson at AXA. “Insurers can play a part in addressing climate and health risks by developing insurance solutions that promote sustainable behaviours.”