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Valzania says that because this is such a new product line, there is risk associated with offering it. No one really knows what they should charge for coverage like this because it’s never been offered before, he says.
Company Benefits
It isn’t just earnest concern for global climate change that drives new product lines, however; if it weren’t likely to be a profitable situation, no company would offer it. What are the benefits to the insurer who offers green polices?
First, says Mills, it’s great for public relations. “The consumer response is, I think, almost uniformly positive,” he says. “If a particular insured [person] doesn’t purchase a green-related insurance product, it still goes into marketing and branding and presents a positive message and positive branding opportunity,” he says.
Mills adds that companies also like to think of themselves as pushing the edge on an important topic like climate change. “It’s a great story, [and] it’s good for consumers who are getting options that allow them to feel they’re making an impact reducing their own carbon footprint,” he says. “But it’s beneficial to the industry because they can feel they’re at the forefront of something that’s of global importance.”
“It is a bit of a leap of faith on our part,” Valzania says. “We’re offering what I think is very robust coverage and not charging a heck of a lot for it. If a thousand people buy it, of course, statistically only a handful are going to have claims. We ran the numbers over and over again, and we said we could make ourselves blind trying to figure this out, and we figured we’d just try it and charge a little bit more and see how it goes.”
Consumers Embrace Green Options
But at the end of the day, the basic economic principal of supply and demand is at the heart of the conversation about eco-conscious insurance options.
“The industry’s focus,” Mills says, “is really being driven by the consumer. There is an intense consumer awareness, and the industry is aware that being responsive to this is just good for business.”
And it isn’t just consumer interest that’s sparking the changes—consumers are actually buying the policies, says Valzania. “Honestly, we’ve been surprised by the response,” he says.
Lexington rolled out the EcoSurance policies first in the Northeast. “We wanted to help people with their significant energy costs, particularly in the Northeast where many people use expensive heating oil,” he says. “The response was so positive, we bumped up the Upgrade to Green program to a nationwide release [this past] March.”
And while Lexington is one of the leaders offering these policies, it’s likely many others will soon follow suit. Mills says the reason is simple: People will buy it.
“The industry senses that this is not going to be a fad,” he says. “It’s driven in demographics with the younger consumer who will be purchasing insurance products for years to come. It’s something that is here to stay.”
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Text by Alyson McNutt English
© 2008 BobVila.com
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