The World’s Polluted Air: A Growing Risk for Insurers?
According to a recent report from IQAir, a Swiss air quality technology company, the air quality in over 90% of the countries monitored now exceeds the World Health Organization’s (WHO) safe levels for fine particulate matter. This raises significant questions about the potential impacts on the insurance industry, particularly within the realms of health, life, and workers’ compensation.
Air Quality’s Health and Economic Fallout
The detrimental effects of poor air quality on both global health and economic productivity are well-documented. A report by Global Health Research and Policy highlights that the total cost of air pollution on health and well-being reached approximately $8.1 trillion US dollars, accounting for 6.1% of global GDP in 2019. However, the specific implications for insurance have yet to be fully realized.
“While IQAir does not track specific health insurance costs related to air pollution, air pollution has been shown to increase healthcare costs,” explained Glory Dolphin Hammes (pictured above), CEO of IQAir’s North American division. She believes poor air quality contributes to preventable health issues, thereby raising healthcare expenditures for individuals. Hammes also pointed out that “underrepresented groups” frequently bear the brunt of these air quality risks, suggesting that substantial health costs of poor air quality may not yet be reflected as insurance losses.
Workers’ compensation insurers could face a greater challenge. Hammes noted that “in the US in particular, air pollution costs the US economy over US$790 billion annually, or 5% of GDP.” Improving air quality provides a significant economic and health benefit for businesses. “The US Environmental Protection Agency estimates every dollar invested in air quality improvements yields US$30-$90 in economic and health benefits,” Hammes stated. “Air pollution’s economic consequences carry huge implications for people and their communities, including reduced work hours and shifts, increased healthcare costs from disability, asthma and chronic respiratory disease and lost household income from caregiving for ill family members.”
Improving air quality, even in affluent nations, could substantially lower work absences and extend life expectancy, according to Hammes.
Potential Impact on Workers’ Compensation
In addition to health claims, workers’ compensation payouts provide another avenue through which poor air quality can increase insurance costs. Gary McMullen, the workplace risk director for Aon in Australia, has stated that, although air pollution can lead to workers’ compensation claims, the numbers remain “very low” in Australia at this time.
“Depending on the circumstances, air pollution can potentially result in a workers’ compensation claim if a worker develops a health issue directly related to their exposure to significant levels of air pollution at their workplace,” McMullen said.
Workplace Air Quality Risk Scenarios
McMullen identifies the three main scenarios for workplace air pollution risks:
- Industrial workers: Those in sectors like manufacturing, construction, or mining, who are regularly exposed to high concentrations of fumes or airborne pollutants.
- Outdoor workers: Individuals employed in heavily polluted urban environments with high traffic density.
- Indoor air quality issues: Employees working in poorly ventilated buildings with elevated levels of indoor air pollutants, such as mold or chemicals.
Currently, available data shows respiratory system diseases claims in Australia accounted for just 0.4% of total serious claims, or 2,778 claims, over a 10-year period from 2013 to 2023. The numbers peaked in 2018/19 with close to 500 claims. But since then, the count has been dropping each year and was just 233 in 2022/23.
“The link between a reduction in respiratory diseases claim numbers since 2018/19 and the low [very good] PM2.5 air quality data score in the World Air Quality Report is possible, however it would need a far more thorough investigation to test this hypothesis,” added McMullen.
Australia was one of only seven countries that meet WHO’s air quality standards, along with the Bahamas, Barbados, Estonia, Grenada, Iceland, and New Zealand.
