First published in ITIJ 111, April 2010
Sarah Glon details the development of carbon offsetting and socially responsible travel through ‘green’ insurance policies
In response to the worldwide consumer trend to purchase ‘green’ products and services, a growing number of travel insurance companies are choosing to ‘go green’ themselves – being ‘green’, for all sakes and purposes, can be defined as being a process, product or service that is environmentally-friendly and energy efficient. As such, some travel insurance companies are ‘going green’ by ensuring that their day-to-day business is as environmentally-friendly and energy efficient as possible. Others are now helping to make travel, which contributes significantly to total green house gases emissions, greener.
Why green travel insurance?
According to Robert Stevens, vice president of Climate Care, a company that provides advice and support to businesses engaged in carbon offsetting activities, emissions from holiday travel result from how a traveller gets to and from his or her destination. “Some [emissions] are related to hotel stay or other activities, but the biggest portion of it is in transport,” he states. In general, says Stevens, most people fly when travelling, which accounts for two to five per cent of global emissions.
Lucy Brehm, senior manager of business development at The Climate Trust, a non-profit organisation specialising in climate solutions for governments, utilities and businesses like travel insurance companies, states that approximately two tons of carbon dioxide is emitted from just one person on a single flight from San Francisco to London, which is roughly 5,357 miles, or about 8,621 kilometers. “Landing and taking off is a big part of the world’s pollution,” she points out. “If you look at the individual [carbon] footprint of a traveller,” Steven adds, “the average annual footprint [in the United Kingdom] is around 10 tons of greenhouse gases.”
To help mitigate the environmental damage caused by travelling, carbon offsetting activities can be funded when taking out a travel insurance policy from a provider that partners with carbon offsetting companies. “There are a range of solutions for how offsets can be applied to travel insurance,” says Stevens. “It can be built into the price of the [insurance] policy, or it can be an option.” Concerning the latter, Stevens clarifies that some travel insurance companies provide customers the opportunity to donate money to offsetting activities instead of including that extra fee within the price of the policy. He suggests the option to fund offsetting activities is more attractive to both the customer and the company.
the option to fund offsetting activities is more attractive to both the customer and the company
According to Stevens, Climate Care takes the money it receives from travel insurance providers, like Climate Sure in the UK, to finance various activities such as wind farms, ‘which produce clean energy’. Other projects of Climate Care’s are community-focused. For example, Stevens notes that one Climate Care activity involves the procurement and distribution of wood-burning or charcoal stoves to developing countries such as Uganda, Ghana and Cambodia. “Many more are in the pipeline,” says Stevens. The stoves are typically more expensive then standard stoves, but are also greener. “These stoves burn less fuel so result in less emissions,” says Stevens, who points out that the ‘greener’ stoves also burn fuel more efficiently. Therefore, while initially more expensive, these stoves are economically viable solutions for the long-term and create additional benefits for its recipients. “They help save money for the families [to which they are distributed] since they are buying less fuel. There are also health benefits,” he states.
On the other hand, some travel insurance companies will take a portion of the premium paid for a policy and direct that towards an environmentally-friendly cause. HSBC Insurance (Asia-Pacific) is one such example. One per cent of all insurance premiums purchased by HSBC customers between July 2008 and this June have been, and are still, automatically donated to their ‘Let's Travel Green’ programme, which helps to reduce pollutants that result from air, land and sea travel.
According to the company’s Hong Kong-based corporate communications manager, Jane Yuen, the ‘Let’s Travel Green’ programme has already seen HK$2 million donated by HSBC to The Hong Kong Polytechnic University to develop ‘Eco-blocks’, pollution-fighting structures that are being placed on the grounds of 10 different schools in the Hong Kong province. This effectively benefits 3,000 students and 200 teachers, says Yuen. These eco-blocks, she adds, are capable of removing air pollutants, ‘such as nitrous oxides, by at least 20 per cent in the laboratory’.
Brehm explains that there exist many other kinds of carbon offsetting activities supported by funds received from travel insurance companies (whether through customer donation at the time he or she purchases a policy, or because a portion of the cost of an offsetting activity is already included in a premium) include forestry projects, such as forest preservation and/or restoration, and projects related to energy efficiency, environmentally-friendly transportation and renewable energy.
What about socially responsible travel insurance?
The environmentally conscious consumer and traveller may also be interested to know that an increasing number of travel insurance companies are also offering what can be referred to as socially responsible travel insurance. While green travel insurance helps the environment, socially responsible travel insurance is now providing consumers with a chance to help people.
Christopher Noble, general manager at World Nomads, a travel insurance provider based out of the United States, is a proponent of socially responsible travel and, subsequently, travel insurance. “Our belief is that all travellers have a duty to give back to those less fortunate communities that they travel through,” he states. Besides taking responsibility for the environmental impact caused by modern-day traveling, voyageurs now also have the option to purchase insurance policies/premiums that help to support under-developed countries and communities around the globe. “We have a CSR [corporate social responsibility] programme called Footprints,” states Noble. “Those customers who buy travel insurance through WorldNomads.com can choose to donate to a community development project being run by a number of our charity partners. One hundred per cent of funds go through to these projects and we then report back to those who donated once the project is completed,” he explains. He notes that over $800,000 has been raised and over 54 projects funded worldwide since the Footprint’s inception four years ago, adding that his company’s clients have the option to donate or not.
while green travel insurance helps the environment, socially responsible travel insurance is now providing consumers with a chance to help people
However, Noble does clarify that most of his clients opt to donate to an offsetting activity through Footprints since, on average, it only costs them $2 more than the price of the policy. At present, says Noble, around 90 percent of customers choose to support a Footprints project when purchasing through WorldNomads.com. “It’s a very easy decision for most of our customers to make. Donating less than a cup of coffee whilst making a purchase of, on average, $180 is not a great stretch to the wallet,” says Noble.
Things to look for
Making sure that the money a customer spends on offsetting activities is used entirely for those purposes is an important factor to consider when deciding from which green travel insurance provider to buy. When shopping around for a green or socially responsible travel insurance policy, Brehm cautions, “I would look for who is providing the offsets and go to their site. How do they find and verify offsets? What is their certification, or the certification of the offsetting activity?”
Stevens points out that his company uses a strict due diligence process before partnering with any particular offsetting activity or project; customers should look for travel insurance providers who do the same. Inspecting the partners that your travel insurance company works with to fund offsetting activities is necessary. Stevens points out that Climate Care verifies that efforts of the partners they work with are certified according to international standards such as the Gold Standard. Other companies follow the Voluntary Carbon Standard, another equally internationally trusted certification.
As with green travel insurance policies, customers of social responsible travel insurance policies should take care to not only explore to whom the money is sent, but what the purposes of the activity are as well. “All projects we fund should help meet at least one of the United Nation’s (UN) Millennium Development Goals that aim to eradicate extreme poverty,” said Noble, when asked to explain how his company chooses which projects to fund. He added that World Nomads partners with these particular projects because they exhibit proven track records that not only support the millennium goals of the UN (and World Nomads), but also have the ability to create real results.
a clear monitoring and reporting system that demonstrates how and what your money is used for is equally important
Moreover, ensuring the accountability of both your travel insurance provider and the offsetting activity or project that it partners with to send your donations is key. A clear monitoring and reporting system that demonstrates how and what your money is used for is equally important. “Critical to the success of Footprints is the ability to ‘close the loop’ on the donations provided by our customers and report back on the outcomes of each project,” states Noble. A clear reporting system ensures transparency.
Brehm advises consumers to donate only to offsetting activities with ‘additionality,’ or ‘beyond business as usual’ characteristics. She advocates for these kinds of activities because they result in observable, significant greenhouse gas reductions. “Offsets should incentivise reducing one’s carbon footprint,” she said, “and not because it’s a statute or regulation.” Offsetting activities are verifiable and high quality if they encourage and motivate new, environmentally friendly behavior, continued Brehm. For example, while contributing to a wind farm is valuable, it is an old project. “If it has been there for 10 years already it’s not necessarily the best thing that your money can go to now,” she added. “When you make an investment it should be a new project, like reforestation of a piece of land.” Projects with multiple benefits are the best to support as well. “People are interested in co-benefits of local projects,” remarked Brehm, adding that “there are projects that create jobs and provide other interesting benefits [besides carbon emission reduction].”
Red-flag raising policies
According to Brehm, there are some red flags that signal the money donated to an offsetting activity or programme through a travel insurance provider might not be used as efficiently or as honourably desired. “If anyone who tells you that ‘We’re going to buy offsets,’ that is a red flag,” she warned. She then added that there should be some information about the activity or programme publicly available, such as a website; if not, that’s a warning sign. There should also be a clear monitoring and reporting system to track developments, methodology and prove that emissions, or positive results in the case of socially responsible activities, are being reduced and increased, respectively.
A growing trend?
Companies that provide carbon offsetting activities for businesses such as travel insurance companies are hardly new –The Climate Trust, for example, was established in 1997, while Climate Care was established in 1994. The fact that these companies see more and more customers opting for green and socially responsible travel, among a host of products and services from other industries (through the purchase of travel insurance policies), suggests this trend may become the norm. “Green travel insurance is an interesting concept and it’s a positive sign of how the travel insurance industry continues to innovate to meet customer preferences,” said Daniel Durazo, director of external communications, Mondial USA.
As any customer purchasing a travel insurance knows, ‘green’ policies or policies with optional offsetting activities are still not a standard practice. However, Stevens noted that these are becoming increasingly popular amongst travel insurance companies: “It’s fair to say it is a growing trend. There is an interest across the insurance industry in offsetting, but there’s still an opportunity for travel insurance companies to take a lead in this.”
Noble argued that providing the option of green or socially responsible travel insurance policies gives a competitive advantage. “After perceived value for money, Footprints is the number one reason why customers choose to purchase through WorldNomads.com, so it’s definitely a major factor in their purchasing decision,” he stated.
Stevens points out that there is an interest by consumers of all sectors, including travel insurance, to tackle climate change. However, this does not have to mean significant additional costs for the consumer. “Offsetting one ton of carbon dioxide costs £7.50 through Climate Care,” he stated, adding that “a round trip from London to Barcelona produces a quarter of a ton of carbon dioxide, and would cost £2.30 to offset.” What is certain is that providing the option of purchasing offsets is a more popular option then building the cost of the offset into the travel insurance product. Moreover, said Stevens, “Coverage shouldn’t change.”
Similarly, Yuen states that the ‘Let’s Travel Green’ insurance policy programme does not affect coverage or pricing. The price of the policy would be the same whether or not the programme existed. “There will be no changes to the pricing, terms and conditions of the policy you buy,” said Yuen, adding that “by simply buying a travel insurance policy from HSBC Insurance, customers can automatically join hands in protecting the environment.”
who is the more natural supplier of carbon offsets to travelers: airlines, or other secondary travel suppliers?
Moreover, this is a trend that could really catch on because it doesn’t require much from the traveller themselves. Yuen also stated that the ‘Let’s Travel Green’ programme “is a handy programme for our customers to lessen the impact of their travels on the environment, without changing their lifestyle.”
On the other hand, not everyone in the industry is so sure. “Time will tell whether the market for this combination [of travel insurance and carbon offsets] is commercially viable or whether it will remain a very niche product,” said Durazo, who added: “There may also be a shakeout in the future to determine who is the more natural supplier of carbon offsets to travelers: airlines, or other secondary travel suppliers?” Noble ultimately sums up the issue of green and socially responsible travel insurance policies best: “So long as the initiatives are tangible, so long as the means by which they are funded and reported are transparent, then customers will continue to support these initiatives.”