Ethical Travel Insurance

Ethical travel insurance companies

Brexit and the Covid-19 global pandemic have highlighted the importance of taking out travel insurance. We have become more savvy at reading the small print and looking for exclusion clauses to maximise our chances of a successful claim, should it come to that.

But are we shrewd enough to also find out about the ethical practices of travel insurance companies?

Buying ethical travel insurance

In this guide we look at travel insurance companies’ investment and climate policies, what their tax arrangements are, and if they have connections to weapons and the military.

With some very low scoring big-name brands, and one Best Buys in the guide, there are clear differences between the least and most ethical providers, with many of the companies we reviewed clumping in the middle of our score table.

Why is eco-friendly travel insurance important?

The insurance industry is huge. According to the Association of British Insurers (ABI), the industry in the UK is managing £1.8 trillion of investments. This is equivalent to around 25% of the UK's total net worth. While this figure includes life, health and general insurance too, as you can see from the table, most household names have a finger in the travel insurance pie as well.

Given the monetary value of the insurance industry, and its links to climate change, our choice of which company to go with has global implications.

What's the difference between underwriters and brokers?

There are two main types of company that sell insurance – underwriters and brokers.

Brokers sell policies on behalf of underwriters, and include well known brands such as Sainsburys, the Post Office or the Co-op. They make money by receiving a commission from the underwriter, once a policy is sold.

In this guide we are mainly rating underwriters. These are the companies that take most of the money from an insurance premium (but which also pay out when something goes wrong) and therefore have the most impact. Several underwriters also sell directly to the public, or belong to the same company group as the broker itself. We have included two brokers that have underwriter companies in their family trees: Naturesave, underwritten by sister company Ecclesiastical and part of the Benefact Group, and Saga whose in-house insurer is Acromas.

To complicate matters, brokers can sell policies from a variety of underwriters. And underwriters selling directly to the public can sometimes use different underwriters for other specific policies and risks. 

You should be able to find out the underwriter from the 'Key facts' or policy wording documents which must be provided when you’re considering buying a policy. Comparison websites will also sometimes tell you. If your broker or website won't say who is underwriting a policy proposal, it's best to try another broker.

Travel insurance and transparency of investments

An insurer's investment policies are of crucial importance to ethical consumers. Without scrutiny, you may inadvertently be funding unethical activities like Arctic oil drilling, coal mines or unsustainable palm plantations with your premiums.

We describe how we rate investment transparency in our home insurance guide.

Most insurance companies have some kind of ethical investment or exclusion policy.

For example, apart from esure, Saga, NFU Mutual and Tesco all companies we reviewed placed a restriction on investing in coal mining. But most stop here.

Of all the companies, only Naturesave's sister company Edentree (also under the Benefact Group) discussed restrictions on deforestation, human rights and animal abuse.

Are travel insurance companies addressing climate change?

The less a company restricts its investments, the higher the possibility that it will be investing in climate damaging companies.  

All of the companies in this guide scored worst for our climate change rating and lost a whole mark in this category. The are several reasons for this.

One aspect that all companies failed on was fully reporting on their indirect (Scope 3) CO2 emissions. This includes for example, emissions from supply chains and business travel, but crucially, also investments. Calculating emissions from investment portfolios is not easy but certainly not impossible either.

Companies are also still very willing to invest in fossil fuels, although we can see a trend for divesting. Although most companies that bothered to set a threshold for their coal related investments set it at around 30%, some went lower.

Aviva and Direct Line for example, committed to divest from companies which make more than 5% of their revenue from coal, but they both left a loophole saying “unless they have signed up to Science Based Targets”.

Naturesave is only willing to invest in a company if its revenue from coal was less than 10%. But they went further and apart from checking for the percentage they are also incorporating other considerations reflecting ESG risk (Environmental, Social and Governance factors).

How do some of the travel insurance providers rate for different ethical issues?

Below we focus on a few of the categories where we have reviewed and rated the home insurance providers.

Tax avoidance

Tax avoidance strategies appear to be prevalent in the industry.

Apart from Admiral, Churchill, Direct Line, Naturesave, NFU Mutual, and Virgin Money, all the other companies in our guide showed signs of likely use of tax avoidance.

We have a separate article about the finance industry and tax avoidance.

Anti-social finance

Some of the money companies save on taxes goes towards their management remuneration. All of the companies lost a whole mark for paying (well) over £1 million a year to their directors.

We have a separate article about excessive high pay in the financial sector.

Arms and military supply

With war raging just a couple of thousand miles away you may be more interested in/sensitive to knowing which companies finance arms.

Aviva and Allianz were named in the ‘Don’t Bank on the Bomb’ report highlighting investments in nuclear weapons.

Allianz was also included in the Dirty Profits 7 report which named companies with some of the highest investments in 11 global arms companies exporting to countries in conflict.

We have a separate article which looks at banks and military spending.

Positive scores

NFU Mutual received half a mark for being owned by a mutual organisation while Naturesave received a whole mark for being owned by a registered charity.

Naturesave also received an extra Product Sustainability score for being a green insurer. Naturesave's ultimate aim is to "sell insurance that is 100% fossil fuel free".

Although NFU Mutual receives a positive half mark, it has numerous less helpful policies which are explored in a feature on the home insurance guide.