Why Are Insurers Charging Less Green For Products That Are More ‘Green’?

Read RiskProf’s post about insurers offering discounts for ‘green’ insurance products, especially this paragraph:

I wonder what is driving this insurance/global warming linkage.  I am in favor of the industry pricing risk better but it is not likely to  be a source of a social subsidy for high cost low carbon project unless the projects have a lower risk of loss.

I think I know what is driving it.  Insurers typically have little contact with their customers.  Most sell insurance through independent agents, and the only "communication" between insurer and policyholder, other than advertising, may come in the form of a bill, or when a claim is filed.  The claims experience is a rude awakening for many policyholders because they have never read their policies, have never thought about insurance theory, and are shocked at what seems to them like a one-sided, self-serving, "technical" reading of the policy.  What most people hear about insurance companies are stories of bad experiences from the news, or from their friends and neighbors.

Offering these green products is probably another form of advertising to soften the image of the insurance company and a recognition that global warming is a hot topic with a large constituency, so why not try to gain a competitive advantage over other companies with customers who are most concerned with that issue?  Here’s a link to an earlier post I did on the subject.

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