Insurance Industry Leadership

Good news in the fight against global warming -- the private sector, motivated by the almighty dollar -- are waking up to the problems and financial opportunities presented by climate change.

Via USA Today:

New combatant against global warming: insurance industry

Updated 10/13/2006 11:46 AM ET
By Ron Scherer, The Christian Science Monitor

NEW YORK — Insurance companies, who like to stay out of the limelight, are becoming leading business protagonists in the assault on global warming.

•Next week, Travelers, the giant insurance firm, will offer owners of hybrid cars in California a 10% discount. It already offers the discount in 41 other states and has cornered a large share of the market.

•This fall, Fireman's Fund will cut premiums for "green" buildings that save energy and emit fewer greenhouse gases. When it pays off claims, it will direct customers to environmentally friendly products to replace roofs, windows, and water heaters.

•In January, Marsh, the largest insurance broker in the U.S., will offer a program with Yale University to teach corporate board members about their fiduciary responsibility to manage exposure to climate change.

The insurance industry's clout is sizable. It's the second-largest industry in the world in terms of assets, and has a direct link to most homeowners and businesses. It insures coal-fired power plants as well as wind farms, so it can influence the power industry's cost structure. With its financial muscle, the industry could help advance the use of new financial instruments designed to allow companies to trade greenhouse-gas emissions in the same way that commodities are bought and sold.

...One reason for this massive change in coverage is an ongoing shift in the way insurance companies view risk. Insurers are starting to change their risk-assessment models to reflect future climate-change scenarios instead of past weather patterns.

...In fact, the industry is not driven just by an attempt to help the environment: It also wants to make money. In Travelers' case, the impetus to give a policy discount on hybrid cars came when Greg Toczydlowski, a senior vice president of product management, was gassing up his wife's Ford Excursion.

"A hybrid zipped in and out while I was still pumping, and it occurred to me it takes so little gasoline and runs so much longer on a tank," says Mr. Toczydlowski. "I came back and did research on how many hybrids are out there and what's the profile of the customer. We discovered it was a preferred customer — middle-aged, very responsible, and stable financially."

Now hybrid owners, besides saving on their fuel bills, can save money on their auto insurance — about $100 a year, according to Travelers.