Although green products may be sold initially at a premium in some areas, in the future, homeowners who build to greener standards may be seen as lower risks and could be rewarded with insurance discounts or credits. That's already happening on the commercial building side and in auto insurance, where insurers in some states are offering breaks to hybrid-car drivers.
Two major insurers are launching "green" insurance programs that will let homeowners reconstruct their property with more environmentally friendly building materials, appliances and landscaping, even if it costs more than the policy's replacement value.
One major insurer, Fireman's Fund, is launching its "green" insurance program in southern California at no extra charge to its clients, who were hurt by a dozen wildfires that killed seven people and destroyed nearly 2,200 homes in October. And Lexington Insurance Co. is testing a new "green" policy in a handful of East Coast states.
"It ties back into our view about climate change," said Scott Steinmetz, Fireman's director for personal insurance and catastrophe management.
Spurring clients to rebuild to greener standards is an insurer's hedge against climate change, and the worse and more frequent natural disasters that could be brought on by warming global temperatures, he said.
Green insurance products are also a way for insurers to hook a consumer market that's grown increasingly conscious of environmental issues. The budding residential green building market is forecast to grow to $40 billion to $50 billion by 2010 from $7.4 billion today, according to a construction report by McGraw-Hill Cos.
"This has emerged as a new way to attract and retain customers," said David Valzania, vice president of personal lines at Lexington, a unit of American International Group. "We're seizing on what we see as a significantly growing green movement."
Sean Walsh's mother, Patricia, has a policy from Fireman's Insurance, and Sean says he plans to use the green upgrade program to make the new home more environmentally sound -- with a focus on fire safety. Patricia Walsh's $2.3 million home, which she and her late husband John, bought two years ago, was built in the 1980s and remodeled in 2000.
It had some fire-retardant materials in it, Walsh said. "The unfortunate part was that this fire was so hot and so fast."
The new home will likely be built with wood framing that is forest stewardship-certified, which means it has been grown and harvested sustainably. The house will be outfitted with more efficient plumbing fixtures and solar paneling -- ways to save utility costs and resources in water- and energy-strapped southern California.
"My parents had looked at going solar even before this happened," Walsh said. "We had a lot of problems with rolling blackouts. It's expensive to do, but it does pay for itself."
Fireman's is offering other types of green upgrades, including paying for less chemical-heavy paints and carpeting, flooring made from eco-friendly bamboo, and energy-efficient appliances, heating and cooling systems -- even if the upgrades cost more. [...]
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