Supporting the switch to green

21 Apr 2023

Late last year, QBE launched a first-to-market green insurance benefit that can help homebuyers to save money, drive down emissions and direct premiums to impact investments. QBE’s initiative is a brilliant example of sustainability’s virtuous circle, so we checked in with QBE to find out how the market is moving.

In October 2022, QBE launched what it calls a "5% benefit for homebuyers". Customers with green mortgages through NAB or Bank Australia can save at least 5% on the cost of lenders’ mortgage insurance with QBE, provided they meet several requirements, including a minimum NatHERS 7-star rating or Green Star Homes certification.

QBE’s initiative supports efforts to address climate change by directing all premiums collected to Premiums4Good, which channels customer premiums into investments that have social or environmental benefits.

“Premiums4Good supports our belief that we can deliver attractive risk-adjusted returns – at no extra cost to the customer – while delivering positive social and environmental impacts,” says Pat Priest, QBE General Manager, Lenders Mortgage Insurance.

By the end of last year, QBE had invested USD$1.6 billion through Premiums4Good across 11 impact areas, spanning everything from renewable energy to clean water, social housing to gender equity.

While it is early days for QBE’s green insurance benefit, the market response has been “in line with our expectations,” Pat adds.

“The transition to green homes will not be immediate. However, as the broader sustainability transition accelerates with time, and all newly-constructed housing is required to meet stricter energy efficiency standards, QBE’s offer, in tandem with lender interest rate discounts, can help more people to purchase green homes.”

Setting the seven-star standard

In August 2022, federal, state and territory building ministers agreed to mandate a minimum 7-star Nationwide House Energy Rating Scheme (NatHERS) rating for all new homes from October 2023.

While this shift is significant, QBE’s Australian Housing Outlook: Green Edition notes that the effect on overall housing emissions will be slow to materialise. New homes replace less than 2% of the building stock each year, and nearly half (46%) of the stock constructed before 2015 will still be standing in 2050.

Analysis undertaken by Sustainability Victoria in 2016 found pre-1990 houses had an average rating of 1.57 stars, while post-1990 houses averaged 3.14 stars.

But Climate Council modelling demonstrates that 7 star all-electric homes produce 25% fewer emissions than the 6 star equivalent, and save households an average of $450 on heating and cooling costs. It’s these benefits that QBE’s initiative can help homeowners and upgraders to access.

Capturing the elusive green customer

EY’s recent Insurance Risk Report found that 79% of consumers now consider insurers’ commitments to environmental issues in purchasing decisions. But there is still room to close the “intention-action gap”. One survey published in Harvard Business Review, noted that 65% of consumers want to purchase purpose-driven brands that advocate sustainability, yet only about 26% actually do so.

How do we capture the elusive green consumer?

“We want to help drive the green housing conversation in Australia,” Pat says, adding that one way to do this is to reinforce the solid case for sustainable housing.

Studies indicate that energy efficient homes may be valued 5-10% higher than those without sustainable inclusions. Sharing the benefits of sustainable homes and providing incentives, such as our lenders’ mortgage insurance rate discount, to increase uptake are ways in which we can help to accelerate the transition.”

Partnerships with property

The Insurance Council of Australia forecasts that the total cost of climate-related extreme weather events will reach an eyewatering $39.3 billion a year by 2050. The ICA launched its roadmap to net zero in November 2022. This charts a path for insurers to achieve net-zero by 2030 for their own operations.

QBE is already a step ahead, having met its RE100 commitment in 2021, which means sourcing 100% of its electricity for its global operations from renewables. Since then, QBE has set a new commitment to achieve net-zero emissions, across Scope 1 and 2, and a defined inventory of Scope 3 emissions for global operations by 2030.

While finding solutions to material issues like climate change may extend beyond its insurance value chain, QBE believes that engagement and advocacy, either directly or through industry alliances, are important levers. When it comes to housing, Pat notes that having external partners who are aligned in driving solutions is another critical factor.

“We want to ensure that as an industry, we are providing incentives that enable homeowners to make sustainable choices, and for QBE, our relationships with our banking partners have helped us make this possible.”