Air Quality’s Financial Implications for Insurers
In a recent report, Swiss air quality technology company IQAir released its annual World Air Quality Report. The study, which analyzed data from over 40,000 monitoring stations in 138 countries, revealed that more than 90% of these countries have air quality levels exceeding the World Health Organization (WHO) guidelines for fine particulates.
This raises critical questions for the insurance industry, particularly in the areas of health, life, and workers’ compensation.
Health and Economic Impacts of Poor Air Quality
The detrimental effects of poor air quality on global health and economic productivity are well-documented. According to a report by Global Health Research and Policy, “The World Bank estimated that the overall cost of air pollution on health and well-being was approximately $8.1 trillion US dollars, or 6.1% of GDP, in 2019.”
While the direct impact on insurance costs is still being quantified, the link between air pollution and rising healthcare expenses is evident. Glory Dolphin Hammes, CEO of IQAir’s North American division, noted that poor air quality leads to preventable health issues, which subsequently increase healthcare costs for individuals. Significantly, she pointed out that “underrepresented groups” are often most exposed to these risks.
Workers’ Compensation Concerns
The implications for workers’ compensation insurers may be more immediate. Hammes stated that in the US, air pollution costs the economy over $790 billion annually, which represents nearly 5% of the nation’s GDP. Better risk management of air quality could bring considerable economic and health benefits to businesses. The US Environmental Protection Agency estimates that every dollar invested in air quality improvements yields $30-$90 in economic and health benefits. The CEO cited examples of health-related costs that reduced work hours due to disability, the increased healthcare costs from illnesses like asthma and chronic respiratory disease, and lost household income.
Air Quality’s Impact on Workers’ Compensation Claims: An Australian Perspective
Poor air quality can manifest in insurance claims, most notably through increased health claims and workers’ compensation payouts. Gary McMullen, workplace risk director for Aon in Australia, stated that while air pollution can lead to workers’ compensation claims, the numbers in Australia are currently “very low.”
McMullen elaborated that “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.”
There are three primary scenarios where air quality presents a workplace risk:
- Industrial workers: those in manufacturing, construction, or mining are regularly exposed to high levels of fumes or other airborne pollutants.
- Outdoor workers: Individuals working in heavily polluted urban areas with high traffic congestion.
- Indoor air quality issues: Employees working in poorly ventilated buildings with high levels of indoor air pollutants.
Despite these risks, recent data shows a downward trend in air-quality related claims in Australia. Data from Safework Australia indicated respiratory system diseases claims represented a mere 0.4% of total serious claims from 2013 to 2023. While the numbers peaked in 2018/19, they have decreased each year since. McMullen suggested that the reduction in respiratory diseases since 2018/19 correlates with the improved air quality reported in the World Air Quality Report, although further investigation is required.
Australia has been recognized as one of only seven countries that met WHO’s air quality standards. The other countries were the Bahamas, Barbados, Estonia, Grenada, Iceland and New Zealand.
