The Big Question: What impact could greenwashing have on insurance provision and management?

Alex Nurse, partner, Kennedys Law

As with any business, an alleged exaggeration by an insurer or broker in relation to the extent to which it is making efforts to provide consumers with green products, or to operate in an environmentally friendly and sustainable fashion itself, risks exposure to litigation, regulatory intervention or reputational damage.

Take, as an example, the FCA anti-greenwashing rule, now in force, which emphasises that statements must be clear and not misleading. The FCA’s greenwashing rule applies to statements made about the insurer’s own business and how it is run, as well as to product level claims if statements relate to the sustainability of the product the insurer offers.

One can see the potential for insurers to be exposed to regulatory intervention if the FCA perceives that statements made are in any way misleading. Indeed, there is significant FCA focus on insurers at present, generally speaking.

One other potential exposure might be claims against brokers based on an alleged breach of duty to customers that make specific requests for insurance to be placed with firms that have positive green credentials – and that requirement is then not met.

A failure to act on such instructions would have to be shown to have caused a loss.

Or, and I appreciate this does not relate to statements made around environmental credentials, one could see that a broker might be exposed if cover was requested for particular environmental exposures faced by an insured client, but not put in place.

Branko Bjelobaba, principal, Branko

We need to be honest with ourselves and the whole world – the insurance industry insures pretty nasty things and allows them to continue to happen. Without insurance cover, certain operations would come to an end. What I find hard to swallow is how some insurers and brokers claim overly green credentials to make things sound a lot better. It is like saying you drive a 15 mile to the gallon V8, but not to worry as the petrol is unleaded.

Large organisations have to be honest about their considerable environmental, social and governance (ESG) impact, looking at the risks they place or insure and the things they can and must do to help improve sustainability.

However, I do not see much evidence of the sector working together demonstrably for the benefit of the whole industry. We must up our game.

Investors, shareholders, staff and customers must know what is being done around ESG commitments and have a vested interest in ensuring that such matters are taken very seriously. The credibility of firms is at stake and greenwashing risks potential legal action, as well as the wrath of those impacted.

Not so long ago, no one really took much interest in the insurance industry’s role in all of this – but now it cannot be understated.

Ben Howarth, assistant director, head of sustainability and climate, ABI

The insurance industry plays an important role in tackling climate change and supporting the development of new low carbon technologies and innovations.

Accurately reporting against this work is important because businesses need to outline the impact their activity has on the environment and society, as well as assess the risks and opportunities such work presents.  

That is where consistent frameworks and reporting standards come in. These exist to help businesses, including insurers, publish robust and transparent updates on their climate pledges and activity.

By publishing a transition plan and reporting against the incoming UK Sustainability Reporting Standards – which is currently subject to a consultation until 17 September 2025 – insurance providers can demonstrate how they are managing climate risks and supporting transitions to cut carbon emissions.

Furthermore, firms are already complying with the FCA’s general anti-greenwashing rule.  

This requires collaboration between businesses to share data and information, with our members using data from across their customers and suppliers to measure progress on ESG metrics.

A culture of transparency and information sharing will ensure that providers and users of climate reporting can be confident that it is accurate and complete.  

It is important that statements made about action on climate change are backed by evidence. It is also important to ensure that they are reflective of the full scope of a business’ activity. Insurers understand this, as they are themselves reliant on high quality information from their clients and investee companies for their own reporting.  

Addressing climate change motivates talented people to pursue a career in insurance. Often, the best defence against greenwashing will come from having an open and collaborative approach to developing a strategy, utilising colleagues from across the business.

Graham Smart, chief commercial officer, McLarens

The risks of perceived greenwashing in insurance extend beyond reputational damage – they can erode trust in sustainable initiatives and hinder genuine progress. For loss adjusters, credibility and transparency are essential when guiding both insurers and policyholders through sustainable claims handling.

However, aligning claims sustainability goals with underwriting can present challenges when a proposed proposition presents a perceived change of risk. For example, replacing a traditional steel or concrete framed building with one built from timber members and prefabricated insulated panels will likely carry a lower carbon footprint and deliver better thermal performance, yet may cause greater underwriting concern.  

To avoid greenwashing accusations, there needs to be alignment between claims and underwriting, so that there is a rapid and clear understanding of likely impacts on future cover and rating.

Delays in the consideration of any change of risk can impact reinstatement timelines, with speed being crucial when there are business interruption or loss of rent heads of claim.  

To address this, we collaborate closely with insurers to provide clear explanations of proposed alternative propositions and ensure that risk factors are rapidly assessed. It is vital that a transparent position is presented to policyholders and their brokers at the earliest opportunity. 

A robust, transparent and consistent approach is the best safeguard against allegations of greenwashing and a meaningful way to futureproof the insurance industry.

Ultimately, treating sustainability not as a premium add-on, but as a key driver of long-term resilience is crucial.

Jonathan Reed, senior underwriting and claims executive, International Underwriting Association

Insurers have an important role to play in encouraging investment towards greener finance options and, to support this, guidance was issued by the FCA in 2022 and 2023 to help firms comply with anti-greenwashing regulations. International Underwriting Association (IUA) members have welcomed regulatory attempts to provide greater clarity around best practice for sustainability claims that companies may make about themselves.

Sustainability references can be present in a wide range of communications, statements, information and images. If consumers trust such claims, it can enhance the transparency, credibility and integrity of markets.

Ultimately, greenwashing is just one of the latest forms of misrepresentation that insurers are familiar with analysing through their provision of directors’ and officers’ (D&O) insurance cover. Ensuring that product development aligns with the strategic direction of a firm and is reflected in its reporting, product literature and on the ground sales is vital.

Sustainability is a priority across all types of industries and is subject to significant scrutiny from the public and media. Any dishonesty about a firm’s credentials can result in large regulatory fines.

From a professional liability perspective, any consultants or legal advice that a client requests regarding company strategy or product development must account for this risk. If the advice results in penalties being imposed, then professionals could be held responsible for at least some of the cost.