Ethical Car Insurance

Ethical car insurance companies

With one brand scoring zero, and no Best Buys in the guide, there isn't a big choice of highly ethical car insurance providers, with many of the companies we reviewed towards the middle or lower end of our score table.
 

Buying ethical car insurance

An important but underrated way of shaping the world is by choosing an ethical insurance provider.

While on the surface their main activity is to safeguard your property or vehicles against the risk of loss or damage, their main impact on the world arises from, it could be argued, their insurance and investment choices and exclusions.

The difference between insurance underwriters and brokers

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

The underwriter is the actual insurance company that pays out on the claims. While they do often sell directly to the public, many also sell through 'brokers' such as the AA, John Lewis or Policy Expert, which take commission.

We cover underwriters in this guide because these are the companies that hold the assets and which, therefore, create policy on whether to make ethical investment decisions. They can also create policy on whether or not to insure coal plants and other controversial projects. We have included two brokers that have underwriter companies in their family trees: Naturesave, underwritten by sister company Ecclesiastical, and Saga whose in-house insurer is Acromas. 

If you are buying through a broker, you should be able to find out the underwriter from the ‘Key Facts’ document 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, try another broker.

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. To be included in this guide, a company must have an underwriter somewhere in the company group.

Shopping around for car insurance

Since January 2022 it is illegal to charge less for new customers than existing ones, but it is still worth getting quotes from different companies. 

Price comparison sites can be used in conjunction with our ethical ratings to help make a sensible choice all round. Check more than one comparison site and don’t forget that they get commission from insurance companies.

Co-op car insurance

Co-op Insurance, which used to be an Ethical Consumer Best Buy, is now owned by a broker (Markerstudy Group). It is administered by Affinity Insurance Solutions Limited (AISL) [Markerstudy], and is underwritten by either West Bay Insurance Plc, Sabre Insurance Company Limited, AXA Insurance UK plc, Ageas Insurance Limited or Covea Insurance plc. Your policy booklet will indicate your underwriter.

To see how ethical your Co-op car insurance is, you'll need to look at the policy document and then find the corresponding company on our rating table.

Car insurers and climate change

Another crucial aspect of insurance companies’ practices is their approach to climate change. Unfortunately, all of the companies in this guide scored worst and lost a whole mark due to this.

The reasons behind this are several fold. One aspect that all companies but Covéa and Hiscox fail on is fully reporting on their indirect (Scope 3) 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 still very willing to invest in fossil fuels, and in particular, coal. But we can see a trend for divesting. Although most companies that cared to set a threshold for their coal related investments set it at around 30%, some went lower.

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

Apart from coal, companies make climate commitments of various shapes and sizes. Indeed, it is somewhat of a surreal experience reading about how a company is changing its office lighting to L.E.D. while it is investing millions into fossil fuels. But some insurance providers are definitely greener than others.

• Ageas says that it is committed to growing profitably through ethical and responsible investments but doesn’t give much details on the how.
• Covéa just says that it can “contribute to the reduction of our customers’ and members’ emissions by making specific offers to them”.
• Direct Line said that by 2030 the Group will have reduced by 50% the weighted average carbon intensity of corporate bond portfolios. While this sounds good at face value, carbon intensity is not the same as total carbon emissions. Intensity-based decarbonization goals are controversial, as they do not guarantee absolute emissions reductions.
• Hastings just says that it has a responsible investment framework but doesn’t give details.
• Lloyds has a somewhat confusing commitment to not financing new clients in the oil and gas sector “unless it is for viable projects into renewable energy”.
• NFU Mutual is just encouraging its fund managers to consider ESG (Environmental, Social and Governance) factors, but they also say that "We do not believe that ESG is ‘green’ investing and therefore do not exclude specific sectors deemed to be ‘non-green’ such as Oil".
• Saga does not appear to disclose its plans to reduce the emissions of its investments, except that it ‘ensures’ that ‘robust’ ESG factors are considered when making investments.

Better approaches were:

• Aviva has £1.4 billion invested in low carbon assets which is 56% of its 2025 investment target.
• AXA is applying the “Warming Potential” methodology for its investments and has a green investment target of €26bn by 2023.

Is the insurance industry voluntarily committing to take climate action?

We look at two campaigns seeking to engage insurance providers with climate change.

Insure our future

Insure Our Future is an international campaign calling on insurance companies to exit coal, oil and gas in line with a pathway limiting global warming to 1.5°C.

Insure our Future demands that companies:

• Stop insuring new and expanded coal, oil and gas projects.
• Phase out insurance for existing coal, oil and gas projects.
• Divest from coal, oil and gas companies that are not aligned with a pathway to limit global warming to 1.5°C.

In October 2022, it published a scorecard assessing and scoring 30 global insurance companies based on the effectiveness of their policies to phase out the provision of insurance and investment to coal, oil and gas companies.

The scorecard did not cover all the companies in our insurance guide but included four of the biggest companies – Allianz, Aviva, AXA, and Zurich. They all scored relatively well for their policies on underwriting fossil fuels, as can be seen in the table below.

Worldwide, most large insurers have now backed away from insuring new coal projects but many are still insuring existing coal operations. Allianz, Aviva, AXA, and Zurich are four of the 14 companies in the report that have committed to phase out support for existing coal operations.

The shift away from oil and gas, however, is slower. Allianz has adopted significant exclusions, but Zurich and AXA continue to insure new oil and gas projects in defiance of climate science and evidence.

Overall, Allianz ranks as the insurance company with the strongest policies on restricting fossil fuel underwriting, having adopted significant restrictions on oil and gas in April 2022.

Peter Bosshard, Global Coordinator of the Insure Our Future campaign said,

“Insurance is the Achilles heel of the fossil fuel industry and has the power to accelerate the transition to clean energy. All insurance companies must immediately align their businesses with the 1.5C goal of the Paris Agreement and cease insuring new coal, oil and gas projects.”

On average, the 30 insurers assessed for the Insure Our Future report scored 3.3 out of 10 points for their coal underwriting policies but only 1.1 out of 10 points for their oil and gas policies. Read the full report on the Insure Our Future website.

ClimateWise

ClimateWise is a voluntary insurance industry initiative of Cambridge University’s Institute for Sustainability Leadership.

Members have to report on their climate policies, and support research relevant to climate change and the insurance industry. Being a member is a sign that an insurance company has intentions to tackle its climate impact.

All of the companies in this guide are members of ClimateWise, apart from: Admiral, Ageas, Direct Line, Sampo (Hastings Direct), Lloyds, NFU Mutual, Saga, and Tesco.

How transparent are insurance providers about their investments?

According to the Association of British Insurers (ABI), the insurance 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 and health insurance too, have no doubts that general insurers take their fair share.

These huge sums mean that an insurer's investment policies are of crucial importance to ethical consumers. Without scrutiny, we may inadvertently be funding unethical activities like Arctic oil drilling or unsustainable palm plantations with our premiums.

We rate companies by looking at their investment practices from three different angles:

1. Investment policies – we expect companies to have a clear policy restricting investments in at least three of the following key problem areas: fossil fuels, deforestation, indiscriminate weapons, human rights violations, and animal abuse.
2. Investment disclosure – we want to see companies that are invested in being named, not just sectors.
3. Engagement disclosure – we want to see how they voted at the AGMs of companies they invest in.

The table below shows how insurance companies fare when rated against these criteria. We often see vague policies which do not provide strong evidence that certain companies would not invest in problematic areas.

Note that the worst rated companies in this category, although they may appear higher up our score table than others, will not be recommended buys.

Apart from AXA, none of the companies restrict all investments in at least three of the problem areas.

Most companies have some kind of restriction on investing in coal mining – exceptions were Saga, esure, NFU Mutual, and Tesco – but only AXA discussed restrictions on deforestation and human rights, for all assets.

Inequality in car insurance

The finance industry in the United Kingdom has been known to be the worst performing in terms of pay between full-time male and female employees. But while the gender pay gap has been found to be 27.4% for financial service activities, it was ‘only’ 12.2% in the insurance sector.

There is still scope to improve. Our article on the finance sector and the pay gap has more detail.

Infuriatingly, Citizens Advice found that, in 2022, there was still an ‘ethnicity penalty’ in UK car insurance. Its exploratory research indicated that "people of colour may be paying £250 more a year for their car insurance than white people in areas where there are large communities of colour."

How do the providers rate for different ethical issues?

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

Tax avoidance

Tax avoidance strategies appear to be prevalent in the industry.

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

Anti-social finance

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

Arms and military supply

With war raging just a couple of thousand miles away you may be more interested in knowing which companies finance arms. Aviva, Allianz, and Lloyds Bank were all named in the ‘Don’t Bank on the Bomb’ report highlighting investments in nuclear weapons.

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

Positive scores

Covéa and NFU Mutual received half a mark for being (owned by) mutual organisations.

Additional research for the guide by Sorcha Perris.