If there’s one thing the past few weeks have shown us, it’s that tackling rising energy bills must be a top priority.
As an economy, we’re facing a double whammy of energy price shocks and rising costs stemming from the vulnerability of buildings to more frequent and severe weather events.
Against that backdrop, building resilient homes and business premises, and retrofitting existing ones, must be high on the agenda.
Sustainability in the built environment is better for everyone. It reduces energy consumption, and it improves resilience to climate risks.
We have a once-in-a generation opportunity to get this right. A national, coordinated strategy, spanning government departments and built on insights from stakeholders like insurers, banks and academics, is the way forward.
The UK has one of the oldest housing stocks in Western Europe. The environmental challenge of energy-inefficient houses is exacerbated by the fact that 85% of UK homes use natural gas for heating – a far greater proportion than in countries such as France and Germany.
An AXA UK report found that 60% of UK homeowners are interested in making improvements like investing in insulation or installing solar panels to reduce their cost of living.
We need, collectively, to find ways to incentivise people to turn this will into action.
The insurance industry is well-placed to work with policymakers to help build the country’s resilience. We see the effects of the changing climate first hand. Floods, subsidence, damage by wind or hail and other weather-related issues are increasingly resulting in insurance claims.
Large damage bills from these events not only hit consumers hard, they also pose risks to the sustainability of available and affordable insurance in the longer term.
This is a problem that we need to meet head-on. But neither the insurance industry nor policymakers can do it alone.
A national, coordinated retrofitting strategy would bring numerous benefits.
Improving the energy efficiency of buildings with improvements like insulation, switching from gas boilers to electric heat pumps and installing solar panels will cut bills, help to tackle fuel poverty, reduce reliance on fuel from other countries and increase the value of homes.
There’s clear evidence that ‘building back better’ makes financial sense. Recent research from the United States shows that every dollar spent on pre-disaster mitigation saves about $16 in insured loss.
Simply put, insurance claims will reduce if we can improve the resilience of properties to weather-related events. And that’s good for everyone.
For commercial buildings, retrofitting can result in positive returns on investment through operational efficiencies like reducing energy bills, as well as helping to meet sustainability targets. And we foresee other economic benefits to an integrated, cross-functional retrofitting strategy. A report by the Institute for Public Policy Research estimates that retrofitting every home in the UK would create 1.2 million direct jobs and a further 1.5 million indirect jobs.
The environmental benefits also cannot be understated.
Insurance industry-supported research shows that countries like Denmark, Germany, Ireland and Sweden have all reduced the greenhouse gas emissions (GHG) from their housing stock by between 10% and 20% through a programme of retrofitting.
There are also benefits to health and wellbeing if we can keep people warmer in colder months and cooler in the heat.
In an unstable world people are looking for protection. Building resilience to energy price shocks and to the effects of extreme weather is a double win.
Last week, we sat down with Energy Consumers Minister Martin McCluskey, MPs and other stakeholders to discuss this vision for a national, coordinated and cross-departmental strategy to build resilience and tackle the cost of living. This is a solution that needs the ecosystem of insurers, banks, government, academics, policymakers and construction companies to come together to achieve.
Conversation was engaging and positive, with the Minister saying it felt like the beginning of a discussion rather than the conclusion and agreeing to further interaction on the topic.
Rather than waiting for disaster to strike, we must act now. Collective action is vital for building resilience and sustainability in the built environment. Without it, the government will face an increasing burden as more properties become uninsurable, straining public resources and exacerbating social inequalities.
