New York — The environment is an ever growing topic of public discussion and businesses are increasingly influenced by potential threats to climate change. However, the potential and sustainability of Green Insurance products and services has not yet been fully examined or determined.

A study released by German consulting firm Simon-Kucher & Partners’ suggests significant profit potential in the Green Insurance segment. The study polled 1,500 insurance executives to determine the sustainability of the segment as well as potential differences between the needs of green insurance customers and traditional insurance customers.

According to the results, the majority of insurance executives expect Green Insurance to be a durable, considerable, and profitable market segment (67% of respondents). One explanation of this is the expectation that customers of Green Insurance products will have a higher willingness-to-pay and generate lower costs (72% and 56% of respondents, respectively). However, the study also found Green Insurance customers to be more knowledgeable and demanding about their providers. Almost all respondents believe that provider and service certification will be important for the success of Green Insurance (94% of respondents). Providers will need to prove their credibility in order to capture this segment’s higher willingness-to-pay.

This offers up several strategic actions that insurance companies can take to combat the current economic downturn. They should focus on developing market excellence and strategic advantages in the Green Insurance business. In order to do this, providers must develop benefit-based products which are highly customized for this segment’s needs. Once these products have been created, they should be heavily communicated through targeted advertising campaigns and reinforced with environmental certifications to appease the segment’s desire for credibility.

For example, in June, Novato, Calif.-based Fireman’s Fund Insurance Co. launched a massive public relations campaign when it began offering special rates to homeowners in Illinois who own green homes and those who own conventional homes to rebuild to the latest environmental safety and efficiency standards after a loss. In July, the P&C carrier expanded its offering to more than a dozen more states, and expects to offer the coverage in most other states by the end of the year.

“We believe this is a trend-setting insurance solution for homeowners who are interested in the many benefits of 'going green' at home,” said Donald Soss, chief underwriting officer for Fireman's Fund Personal Insurance, in a statement. Fireman’s Fun, a member of the Allianz Group, claims to be the first property and casualty insurance firm to offer green insurance to the commercial marketplace.

In the past, it has been observed that investing in brand and product differentiation contribute to a distinct and positive image for a company, say experts. Innovative products such as Green Insurance policies that reflect customers’ needs should do just this and will counteract stagnant sales and help firms through difficult times.

Source: Kucher & Partners

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