When we consider the impacts of climate change, we likely picture the immediate effects of weather-related disasters, such as the devastating flooding currently being experienced in Italy: the damage to infrastructure and property and the terrible loss of life. One thing that probably doesn’t come to mind immediately is the long-term impact on people’s health. However, according to the WHO), climate change is the single biggest health threat facing humanity.
More than 12.5 million people die each year from diseases associated with environmental hazards. Between 2030 and 2050, climate change is expected to cause an additional 250k deaths per year through health issues such as malnutrition, malaria, diarrhoea and heat stress. And, by 2030, it is estimated that the direct damage costs to health will be between USD 2 billion -4 billion a year. As a result, the insurance industry should consider how to respond to this situation, given that it is only likely to worsen in the coming years, and develop products to lessen the impact of climate-related health problems and help populations become more resilient.
Understanding the current impact to health
The direct health effects of climate change are already being felt by many around the world. The immediate impacts of extreme weather events - such as heatwaves, droughts or flooding - not only have deadly results, but their impact on sanitation and access to clean and safe food and water can cause further health issues. Additionally, rising temperatures are contributing to the increasing spread of infectious diseases, such as malaria and dengue fever.
Between 2012 and 2021, the number of months suitable for malaria transmission increased by 31.3% in the highlands of the Americas and by 13.8% in the highlands of Africa compared with 60 years ago. The likelihood of dengue transmission also rose by 12% during the same period. And the impacts of carbon-dependent lifestyles are also increasing the risk of new diseases emerging, and the potential for more pandemics in future.
There are also many indirect health implications of climate change. The reduction in air quality is exacerbating respiratory diseases and increasing the number of deaths from exposure to fossil fuel-derived ambient PM2.5 which, in 2020 alone, caused 1.2 million deaths. Exposure to extreme heat is linked to kidney problems which are likely to increase as temperatures rise, as shown by a US study on the relationship between climate change and kidney stones. It estimated that heat-related cases of kidney stones would increase 2.2% if temperatures increase 2°C by 2085-89, and increase 3.9% if temperatures rise more than 4°C. This would result in associated excess medical costs of USD 57m and USD 99m respectively compared with 2010-14.
Rising temperatures also reduce the likelihood of people exercising and increase the risk of heat illness when they do. However, not staying active increases the likelihood of other types of non-communicable diseases, such as obesity. At the other extreme, poor harvests and disruption to the food supply chain caused by climate-related weather events mean many people in certain parts of the world face famine and malnutrition, leading to other associated health problems.
Aside from physical health problems, climate change is also contributing to poor mental health. Acute temperature increase, heatwaves and humidity have all been linked to worsening mental health and increased incidents of suicide. Food and water scarcity, and loss of livelihood can add additional pressure on people who are already struggling to support their families, and climate change exacerbates conflict and violence, all of which can negatively impact mental health. The people whose mental health is most likely to be negatively affected include older people, women and religious or ethnic minorities. Young people are especially prone to anxiety, stress and depression relating to climate change, with 59% of 16–25-year-olds saying they are very or extremely worried about climate change, according to a Lancet study.
Can universal health coverage bridge the gap?
While climate change is impacting the health of people everywhere in the world, it is felt most acutely by people in countries that have often contributed the least to its causes and who are least equipped to protect themselves. Currently, over 930m people spend at least 10% of their household budget on healthcare, however the poorest people are largely uninsured, and health shocks and other climate-related stresses are already pushing around 100m people into poverty each year.
Steps are currently being taken towards universal health coverage (UHC) - a way of ensuring everyone has access to quality healthcare regardless of their financial situation. Countries around the world are looking at this to achieve Sustainable Development Goal 3: Ensure healthy lives and promote well-being for all at all ages. According to the WHO, there are six key building blocks for a successful health system: “service delivery; health workforce; information; medical products, vaccines and technologies; financing; and leadership and governance”. However, to achieve UHC, it isn’t enough to focus only on human health and wellbeing. We need to understand wider influences. The UN’s One Health for One Planet highlights the interconnectedness of human health and the health of the planet and argues that if governments made “broader systemic transformations to end the triple planetary crisis of climate change, nature and biodiversity loss, and pollution and waste, we can heal the planet and ourselves.”
Because of the complexity of these converging challenges, it is argued that the clearest path to achieving UHC is with a government-led financing model. However, there are opportunities for the private sector to support, for example by financing health programmes or providing health insurance. Until now, though, there have been challenges with this approach. Often private funding focuses on a particular disease or health area at the exclusion of tackling the underlying vulnerabilities of health systems and general problems with access. And, while private insurance companies can support public health systems, a 2014 ODI report found that it didn’t necessarily help to reduce the overall cost of healthcare, and actually marginalised groups who had difficulties enrolling. There is also little incentive for private insurance institutions to offer affordable coverage for everyone.
Inclusive insurance’s role in tackling the challenge
For the private sector to contribute meaningfully to this problem, it needs to consider the users most in need of UHC and develop more accessible and relevant products that meet their requirements. And this provides an opportunity for the inclusive insurance industry. Already, in countries where there is micro-health insurance (MHI) penetration, the positive effects are being seen. For example, a 2016 study looking at the role of MHI in providing financial risk protection in Pakistan found that it helped to reduce out-of-pocket health expenditure, catastrophic health expenditure, total health expenditure, household borrowings and poverty.
There are several other examples of microinsurance programmes that are supporting the health of communities in countries severely affected by climate change. For example, in India the Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock) has launched an extreme heat income insurance in partnership with the Self-Employed Women’s Association (SEWA) and Insurtech, Blue Marble. This parametric insurance is activated once specific extreme heat conditions that could endanger health - such as daily maximum temperatures - are met. It is designed to pay out multiple times in one heat season to replace lost income (around $3 per day), and alongside this, provides tools and resources (such as shade tents, clean water and coolers) to help create a safer work environment. Currently this is being trialled by 21k SEWA members in Gujarat during the 2023 heat season, with the aim of scaling it across all 2.5m members in future.
In Senegal, the African Risk Capacity (ARC) has just introduced parametric insurance cover against outbreaks of infectious diseases, focusing on the pathogens responsible for Ebola, Marburg virus and meningitis. It is designed to provide funding for countries to contain ‘disease outbreaks of epidemic potential’. And, in the Philippines, in 2017, Pioneer introduced dengue insurance which provides medical cash assistance as soon as dengue is diagnosed. To increase the uptake of this insurance, Pioneer partnered with the country’s biggest mall chain, The SM Store, to sell the insurance alongside other products, such as travel and motor insurance. Following an initial special offer that provided free dengue insurance on purchase of their separate Sagip plan, more than 157,000 people took the insurance in the first four months.
Despite the successes to date, this doesn’t mean there won’t be challenges ahead. As climate change intensifies, the volume of claims increases and the requirements of customers change, it will put pressure on microinsurance providers and make their investments in certain sectors less profitable. As a result, it’s crucial that the industry considers different ways to manage and transfer this risk. But, if the industry can adapt to these changing circumstances, it will ensure that more of the global population’s health and wellbeing will be protected - regardless of where they live - and will secure the longevity of the industry.
Please do share other examples of micro-health insurance products or initiatives you’ve seen in the market that are focusing on the impacts of climate change.