Greener is Cheaper


Insurers calculate premiums according to risks. Just yesterday, local auto insurance providers proposed another risk to be included in their calculation of costs: climate change. They cite rising costs that come along with it and expressed intention in fighting it. They suggest giving discounts to drivers who go green, those who join in efforts to decrease the amount of greenhouse gases in the atmosphere.

Greener is CheaperLast month, California Department of Insurance approved a proposal by car insurers to give discounts to consumers who drive less. Normally, people who spend lesser time on the road get lower premiums because they are considered less risky than those who get behind the wheels more often. However, the new incentive is part of a much larger outlook.

Insurers say changes brought by climate change could expose them to greater losses. They explained that they aim at participating in efforts to avoid environmental disasters, which are very likely to increase with changing climates.

San Diego’s Scripps Institute of Oceanography just recently published a study verifying insurers’ fear of sudden changes. But critics say some of the changes are nothing more than marketing strategies, designed to take advantage of the public’s growing demand for greener products and services. In a nationwide poll conducted by Celent, a research firm based in Boston, 56 percent of the corresponding employers say they plan to use green policies in their marketing strategies. Critics add that car insurers know that increase profit significantly if they capitalize on people’s need for incentives to go greener.

Federal regulators are also pushing vehicle insurance provider to address the imminent problem.

Starting May next year, America’s largest carriers will be required to submit annual proposals telling investors and regulators how they could mitigate risks brought by climate change. The new rule adopted by National Association of Insurance Commissioners likewise mandates providers to include a report indicating how much risk environmental threats pose on them, as well as the steps they have already taken to minimize them.

“Pay-as-you-drive” vehicle coverage is one of the initial incentives carriers give to clients who participate in the cause. This involves tying rates to odometer readings and other devices which indicate how much a person drives.

Just this September, California auto insurance commissioner Steve Poizner already approved some of America’s “pay-as-you-drive” programs. He based his decision on Environmental Defense Fund’s 2008 report calculating that if 30 percent of Californians use such overage over the next ten years, they can reduce carbon dioxide emissions by 55 million tons.

If signed by the Office of Administrative Law, it will take effect in early November.