Commercial insurance pricing relies on the ability to assess and compare risk with reasonable confidence. When sustainability-related data is missing, that assessment becomes more uncertain. Risk does not disappear, but it is more likely to be simplified, averaged, or mispriced. The cost of that mispricing rarely appears as a single failure. Instead, it accumulates across portfolios as higher volatility, weaker loss ratios, and underwriting decisions that look rational on paper but underperform in practice.
Sustainability data gaps matter because they obscure how resilient an SME actually is. Traditional underwriting captures balance sheets, locations, and historical claims, but it often misses operational fragility. Environmental dependencies, governance practices, and resource constraints shape how a business responds to disruption, yet they remain largely invisible in SME portfolios.
Water provides a useful illustration. Two businesses may operate in the same sector and geography, with similar revenues and claims history. On the surface, they appear to present the same risk. In reality, one may actively monitor water usage, manage discharge responsibly, and understand its exposure to local water stress, while the other operates without visibility or contingency. When restrictions, infrastructure failures, or regulatory enforcement occur, their loss profiles diverge sharply.
From the insurer’s perspective, this difference is often only discovered after the claim. Business interruption lasts longer, compliance breaches trigger liability exposure, and downtime extends beyond what pricing assumptions anticipated. The issue is not water itself, but the absence of data that signals operational resilience. Without that signal, underwriters are forced to assume average behaviour, even when risk is anything but average.
This helps explain a persistent gap between sustainability ambition and underwriting practice. The Business Resilience survey data conducted by Insurance Post and Crif shows that over 30% of insurers and brokers are likely to offer pricing discounts or incentives to highly ESG-compliant businesses, particularly among multiline insurers. The willingness to reward stronger sustainability performance clearly exists.
Yet this intent has not translated into widespread pricing differentiation. The constraint is not appetite, but confidence. Underwriters and brokers do attempt to assess sustainability-related risks, but doing so is time-consuming and heavily dependent on individual experience and judgement. Without consistent, comparable data across SME portfolios, sustainability remains difficult to translate into underwriting certainty.
In practice, this creates a paradox. Insurers are open to recognising resilience, but the lack of scalable sustainability data pushes them back toward conservative assumptions. Rather than differentiating between better- and worse-managed businesses, risk is averaged across portfolios. As a result, insurers face a choice between overlooking sustainability-related operational risk or relying on manual data-gathering approaches that are costly, slow, and difficult to scale.
The opportunity lies in reframing the question. The challenge is not whether insurers have perfect sustainability data, but whether they have enough signal to differentiate risk. Sustainability indicators already exist in public disclosures, digital footprints, sector benchmarks, geographic exposure data, and evidence of policies or certifications. When analysed consistently, these signals can provide a credible view of operational resilience at scale.
This is where The Disruption House helps insurers close the gap. TDH provides scalable, AI-supported sustainability risk indicators for SME portfolios through automated analysis of public and verifiable data, mapped against sector-specific baselines. This enables insurers to screen large books of business consistently, identify where sustainability-related operational risks are concentrated, and distinguish between higher- and lower-resilience counterparties. Crucially, it allows deeper underwriting engagement to be prioritised where risks are most likely to become financially material, without introducing additional reporting burdens or friction into the customer relationship.
The hidden cost of missing sustainability data is not theoretical. It is already embedded in underwriting assumptions and portfolio outcomes. By improving visibility, insurers can move from absorbing that cost to actively managing it, aligning sustainability performance with pricing confidence and strengthening long-term portfolio resilience.
